Fairtrade Foundation Report February 2014 When I Sell a Box of Bananas It’S a Product with Quality, with Incredible Taste, So It Should Be Fair That You Pay a Fair

britain’s bruising banana wars Why cheap bananas threaten farmers’ futures Policy report

A Fairtrade Foundation Report February 2014 When I sell a box of bananas it’s a product with quality, with incredible taste, so it should be fair that you pay a fair

price for it. Horatio Hernandez Coobafrio Co-operative, Magdalena, Colombia January 2014 1 Introduction 4 7 Achieving a sustainable 56 banana industry 2 Executive Summary 6 7.1 An inclusive market 57 for smallholders 3 About this report 16 7.2 Thriving banana farming 58 3.1 Fairtrade’s involvement in bananas 16 communities 3.2 Research objectives and approach 20 7.3 Decent work 59 3.3 Methodological note 21 7.4 Living wages 61 7.5 Workers’ rights to unionise 64 4 The banana value chain 22 7.6 Taking full account of externalities 65 4.1 The UK banana market 22 7.7 A new approach to pricing 65 4.2 The retail price of bananas 23 in Britain 8 Conclusions and 66 4.3 UK banana imports 2002 – 2013 26 recommendations 4.4 Changes in banana supply chain 28 operations 9 Appendices 70 4.5 The impact of supermarket 29 9.1 Appendix 1 Methodological note 71 price wars on producers 9.2 Appendix 2 Description of banana 74 4.6 Producer prices vs costs of 32 production and distribution sustainable production 9.3 Appendix 3 Summary of 75 Fairtrade impact studies

contents 5 The market environment 38 for bananas 10 References and other sources 76 5.1 Evolution of the global 39 banana trade 5.2 Consolidation of retailer 44 power and UK price wars 5.3 The impact of competition 48 law on banana prices

6 Fairtrade’s alternative approach 50 6.1 General background to 51 the Fairtrade system 6.2 Fairtrade bananas – 51 scope and scale 6.3 Fairtrade: the benefits and 52 constraints for farmers and workers

2 Britain’s Bruising Banana Wars Contents 3 Tens of thousands of banana farmers and as environmental sustainability in banana 1/ Introduction In the 20 years workers1 work for Fairtrade producers in production. In this report we explain what 15 countries around the world. Sainsbury’s, has happened and the effect this is having Waitrose and The Co-operative have made on farmers and workers. since the Fairtrade Foundation was commitments to source 100 per cent of bananas as Fairtrade. Millions of pounds But this is not simply a research study: it is established, bananas have been of Fairtrade Premium has been invested a call for action. At its heart the problem is in the lives of banana farmers and workers one of an imbalance of power – power that and their communities in areas such as lies disproportionately with retailers. Are we one of the great Fairtrade success education, housing and healthcare. happy to live with the knowledge that cheap The Fairtrade Minimum Price has helped bananas for British consumers threaten the stories. Bananas are a visible to build sustainable livelihoods, and futures of banana farmers and workers? Fairtrade Standards have improved farmers’ Solutions can and must be found. and workers’ terms and conditions and symbol of the way the British environmental practice at the farm level. Retailers do take their ethical responsibilities seriously, but there is still much more that public has taken Fairtrade to their We want Fairtrade to help drive industry- they can do. They need to ensure that they wide change in products like bananas support the workers and small producers so that all farmers and workers have in their supply chains for the long term by hearts, with 35 per cent of the sustainable, decent work for the long term. investing in sustainability and decent work and resisting the pressure to drive down banana market now Fairtrade. Yet progress against this wider vision is not prices at all costs. going far enough or fast enough. It is ironic that the UK market, which is the world’s But retailers are unlikely to do everything most successful for Fairtrade bananas, has alone – they are in competition with each also been the one in which relentless price other so altruism is constrained by the wars over the past 10 years have resulted in bottom line. A structural problem like this a price decrease of as much as 40 per cent needs the government’s serious attention, for loose bananas while costs of production so we call on the UK government, and the for banana producers have risen steeply. Department for Business, Innovation and Skills in particular, to investigate the UK This price squeeze has had an effect all the retail market in bananas and its impact way down the supply chain, with persistent on the sustainability of the banana supply pressure on prices at the farm level. Average chain and the situation of banana farmers prices in countries that supply Britain’s and workers. banana market are failing to keep pace with the costs of sustainable production. Fairtrade also has work to do: we must redouble our efforts in support of banana The pressure on price has driven a trend in farmers and workers by continually many banana producing countries towards strengthening the Fairtrade system in job losses, the casualisation of labour response to the needs of the producers and the marginalisation of smallholder we work with and inviting our campaigners producers. It makes it much harder to to bring their voices to bear upon those achieve the improvements that farmers and in power to make bananas fair once workers badly need in wages, access to and for all. services and terms and conditions, as well

1 Fairtrade International global monitoring data, Fairtrade International – private communication

4 Britain’s Bruising Banana Wars 1/ Introduction 5 2/ EXECUTIVE SUMMARY Banana farmers and workers around the world are being squeezed. The past 10 years have seen a 40 percent fall in the typical UK retail price of loose bananas while costs of production have doubled in some regions. The pressure on farmers and workers has been relentless. The Fairtrade Foundation commissioned this The money report in order to understand the dynamics earned from banana affecting the distribution of value in banana supply chains. We also wanted to assess production is not the impact of the failure to deliver adequate value on the lives of banana farmers and sufficient because it workers and their ability to secure long- is below the cost of term sustainable livelihoods. We wanted to assess how far a falling retail price translates basic needs, it is also into problems for producers.

not enough to cover Our aim is to set out what can be done to other family costs change things for the better. The Fairtrade Foundation wants to see farmers and such as education workers building sustainable, decent futures from the bananas they grow. We hope and health or for that this report will be a call to action for the payment of basic government, retailers and the public to build a more sustainable and ethical services like water banana industry. and electricity. Bananas and Fairtrade A producer from Ecuador interviewed for this study Bananas have been an important part of Fairtrade’s story over the past 20 years. Their UK launch in 2000 followed several years of campaigning by the Fairtrade movement highlighting the poor conditions of workers on Latin American banana plantations and the way global trade deals were excluding small farmers from the markets they depended on for their livelihoods.

6 Britain’s Bruising Banana Wars 2/ Executive Summary 7 Since their launch bananas have been a to quantify. In 2009, Mark Price, the Chief the poverty line. A notable exception to banana sector. In Ecuador Fairtrade has visible symbol of the way British consumers Executive of Waitrose, suggested to the this trend is Colombia, where a strong What about smallholder helped people who were once seasonal have taken Fairtrade to their hearts. Around Grocer magazine that banana price wars independent trade union represents banana farmers? migrant labourers to become fulltime one-third of this £700 million marketi is now were costing Waitrose £100,000 per around 80 percent of banana workers farmers on their own land. In Colombia Fairtrade, and that is helping thousands of week, while costing other supermarkets in the country. Farmers’ income is also under pressure in Fairtrade certified co-operatives are farmers and workers to secure a better deal substantially higher lossesiii. all of the countries studied. Small farmers achieving good productivity and sales, for their labour. 40 percent of Colombian bananas sold to are under pressure to match the prices paid while in the Windward Islands Fairtrade Several retailers said that they did not the UK are now Fairtrade. Some retailers to large plantations and emerging origins. has been critical to the survival of banana This is good news, but our vision has believe there is any direct relationship have stated that they pay the Fairtrade Their reduced profits affect income for farming by helping smallholder farmers always been to go further. Our hope is that between the costs they incurred in procuring Minimum Price to producers in Colombia their families and make it tough to invest to become organised, upgrade their by demonstrating the ethical (as well as the products like bananas and the price at for their conventional bananas, however we in their businesses or invest in diversifying. production to meet supermarket quality business) case for Fairtrade we can help which they offer them to consumers, have not seen independent verification of They cannot survive in the current banana requirements, and improve livelihoodsv. to influence wider business practices in though most recognised the sustainability this. The other benefits of Fairtrade such as market, and they also cannot afford to products like bananas in favour of farmers challenges facing the industry are linked to the premium payment and environmental leave it. However, repeated damage to the industry and workers. A lot has been achieved: the loss of value from the chain. and workers rights standards would not from hurricanes and disease coupled with Sainsbury’s, Waitrose and The Co-operative necessarily apply when bananas are the pressure on price means that even have made commitments to source 100 per The next link along the supply chain is bought on the conventional market. Fairtrade and with Fairtrade farmers are still struggling to cent of bananas as Fairtrade. the import price – the price at which smallholder farmers secure ongoing and stable market access. bananas are brought into the UK. While Fairtrade regularly updates its minimum In Colombia Fairtrade has helped small Millions of pounds of Fairtrade Premium has the retail price has fallen sharply over the prices, with a price review recently Today the Fairtrade market is one of the few farmers achieve a more viable livelihood been invested in the lives of banana farmers past decade, the average import price of completed. However, unlike most that remains accessible and economically when this was under threat from the and workers and their communities in areas bananas has been reducing in real terms commodities where market prices regularly worthwhile for smallholder farmers in the loss of value. such as education, housing and healthcare. (taking account of inflation). move above (and below) the Fairtrade The Fairtrade Minimum Price has helped to Minimum Price, the Fairtrade Minimum Price build sustainable livelihoods, and Fairtrade The progressive drop in retail price has is too often treated by industry players as standards have helped improve the terms contributed to persistent deflationary a static market reference price rather than and conditions and environmental practice pressure throughout the banana supply the minimum price floor it is intended to be. at the farm level. chain, with banana growers at the end of This is a further symptom of the deflationary the line. pressure on the banana supply chain and Before fairtrade a cut in our wages put the challenge when ensuring that farmers Falling retail prices The squeeze on growers goes further. and workers receive a sustainable, fair us in the red. there wasn’t even enough for The costs of agricultural inputs like fertiliser, price for their bananas. It is ironic that the world’s most successful packing costs and shipping have risen food, nor to pay the workers. fairtrade has market for Fairtrade bananas – the UK – has consistently over the past decade. The been better of course, and it has changed also been the one in which retail prices for wages of workers and the incomes of Loss of permanent jobs in bananas have fallen further and faster than farmers are one of the few variable costs the banana industry our way of working. in other countries. Seven large retailers within the supply chain that can be adjusted control over 80 per cent of UK banana in response to the downward trend in export The price pressure generated by banana Doris Pacheto, member of Coobafrio sales. The price of loose bananas fell from prices. Farmers and workers are too often value chains has also pushed many co-operative, Magdalena, Colombia £1.08 per kilo in March 2002 to only 68p forced to bear the brunt of this pressure. employers to transform permanent jobs per kilo in the biggest UK retailers for most into casual work or outsource them in order of 2013. If the price of loose bananas had For this report we wanted to see how to decrease labour costsiv. As permanent simply kept pace with general inflation, they people in banana exporting countries, contracts have become more scarce would cost £1.40 per kilo today. Compared who were already struggling to afford food, plantation work has become increasingly to the prices of other basic foods such as housing and other basic needs, were coping unattractive to local workers, thus increasing bread, milk, eggs and sugar, which have after a decade of this level of downward the flow of migrant workers from, for risen by nearly 80 percent over the past pressure on the price of a product that is example, Nicaragua to Costa Rica and Haiti decade, the price of bananas has fallen by the source of their livelihoods. to the Dominican Republic, where migrant 20 percent. By contrast, retail prices for workers are vulnerable to discrimination bananas increased by 4 percent in Italy, We found that the declining value of the and exploitation. The Colombian model of 7 percent in Germany and 10 percent in export price combined with increases mature industrial relations is under direct France over the same period. in livings costs has made it hard for threat, with attempts by employers to workers to achieve progress in earnings. contract workers through so-called labour In this report, we show a clear long-term In most countries there is an increasing co-operatives (a form of casualisation). correlation between retail prices and prices gap between the wage rates on banana paid in banana producing countries. plantations and what workers need to provide for themselves and their families. Retailers may well often be selling below Only 25 percent of Ecuadorian households costii in an extremely competitive market, reliant on income from work on banana but details are closely guarded and hard plantations earn an income that crosses

8 Britain’s Bruising Banana Wars 2/ Executive Summary 9 Given that bananas are one of the most have negative impacts on the supply side. Why did the squeeze on frequently purchased food products in All growers are under pressure to achieve What prevents retailers producers happen? Britain – one retailer told us that they higher productivity and better quality and from taking action featured in 90 percent of baskets taken to to reduce water usage, chemical inputs themselves? We also wanted to understand how and their checkouts – a falling retail price and a and wastage. why so much value has been removed from static import cost means that a significant the banana supply chain. The supermarket sum of added value has also been stripped But while it is absolutely clear that all It is clear that no single retailer can address sector in Britain is one of the most out of the UK end of the banana market producers need prices that fully cover their a complex challenge like this alone – though concentrated and competitive in the world, over the past decade. basic costs of production and provide a there is much that they can still do. When with price promotion one of the most visible surplus for those investments, it is extremely the issue is closely related to retail price features of that competition. Four chains This could be seen as an example of free doubtful that this can happen while retailers face other constraints which need account for over 70 percent of sales of food markets delivering value for consumers, supermarket ‘price wars’ are squeezing to be understood. Competition law at both and drink. In 2005 the Office of Fair Trading however the decision to adjust the value value throughout supply chains, and most UK and European level strictly prohibits any found that 93 percent of the population chain of bananas has been taken by critically at the farm level, in the absence of form of concerted actions by businesses have a choice of at least three different retailers alone and producers have had no specific measures to support producers. that may affect trade, and specifically any supermarkets within a 15 minute drivevi. say in the matter and have received none agreements or practices that ‘directly or The current regulatory framework assumes of the value that has been sacrificed by Retailers are active in debates on the indirectly fix purchase or selling prices or any that the market will correct unsustainably Every retailer we spoke to for this study told business actors in Britain. sustainability of bananas. Some have made other trading conditions’. low prices as well as artificially high ones, us of intense and persistent competitive commitments to sourcing from Fairtrade but this is evidently not the case. pressure to keep retail prices for loose There is probably no better illustration of or other sustainability initiatives. Others are This means that discussions at forums like bananas as low as possible. Where retailers the imbalance of power in banana supply engaged with the World Banana Forum the WBF or elsewhere can only be on ‘pre- The rights of producers to receive truly have increased loose banana prices they chains and the lack of proper governance (WBF) – a body under the auspices of competitive issues’. In other words, you can sustainable prices and the rights of have frequently reversed their decisions processes in which all stakeholders could the Food and Agriculture Organization talk about many things but not the price or consumers to purchase ethically and following aggressive advertising by be involved in such decisions. of the United Nations (FAO) that brings other commercially sensitive information2. sustainably sourced produce are losing competitors. One retailer interviewed for this together the main stakeholders in the It seems that although price is the most out to the pressure for the lowest possible report described the price of bananas as a The pressure to reduce prices, almost at industry to work on issues like these. pressing problem facing producers the prices, regardless of the true cost. ‘canary’ (an early warning sign) that would any cost, means that no-one in the supply Other supermarkets are active in the current interpretation of the law prohibits quickly show up how one supermarket’s chain – retailers, banana companies or Ethical Trading Initiative and other most, if not all, of the discussions that could prices compared to the others. growers – are able to adequately reinvest collaborative ventures. enable price to be part of the solution. profits in improving the sustainability of the Retailers also spoke of their responsibility banana industry, even though everyone This situation has been created by a to deliver affordable food to consumers, agrees this is vitally important. skewed approach to market regulation that especially at a time when many people in places low prices and short-term consumer Britain are struggling to feed their families. Bananas, like many other food crops, face interests as its overwhelming priorities. The number of people using food banks has serious challenges arising from population This is not right for a market like bananas, increased from 26,000 to 128,697 in the growth and demographic shifts that will in which 80 percent of the trade is 2 Competition law would prevent retailers discussing past three yearsvii. change the demand side of markets, while represented by a handful of retailers who either the retail price to consumers, the wholesale price paid to suppliers, volumes to be bought and factors such as climate change, water closely match each other’s prices in order sold or cross-commitments as to from whom they scarcity and rising fuel costs are likely to not to appear uncompetitive. should buy products.

10 Britain’s Bruising Banana Wars 2/ Executive Summary 11 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.

Pascal Liuviii, senior economist at Food and Agriculture Organization of the United Nations (FAO) and manager of the World Banana Forum, October 2013 We therefore urge the UK government to • Decent work and living wages What should be done? show leadership and policy coherence The Department for Business and for workers Civil Society across all departments and demonstrate International Development exporting countries – The banana industry must ensure (This is a summary of the detailed a commitment to sourcing our food (DFID) that plantations minimise the use of The role of national and international civil recommendations set out in the sustainably and treating all in the supply We also urge concerted action by the temporary contracts and ensure all society, especially trade unions, is crucial main report). chain fairly: banana industry and its stakeholders workers receive a full entitlement to in delivering change on fair prices at the • The Department for International (retailers, banana companies and bonuses and non-wage payments national and international level. Banana farmers and workers deserve a Development (DFID) should ensure that governments in producing countries) to such as healthcare and social security better deal. Everyone consulted for this The Department for Business, the UK’s positive impact on poverty make bananas fair. The large retailers and provisions enjoyed by permanent Standards and certification bodies, including report – including retailers and banana Innovation and Skills (BIS) among banana farmers and workers is traders must use their dominant positions workers. Fairtrade, need to continue raising the traders – agreed that the banana industry and UK market regulators strengthened by supporting initiatives in banana supply chains responsibly and – Governments in banana producing ‘ethical bar’ in order to drive improvements faces serious sustainability challenges. that incentivise living wages and payment should commit to paying a fair price to countries must take a lead on setting and that enable banana farmers and workers Moreover, the problems have been of cost of sustainable production in farmers and workers. This includes: enforcing living wage levels in the banana to build stable, sustainable livelihoods. recognised for a long time, and the time for • The Department for Business, Innovation agricultural supply chains industry. Banana companies and retailers Fairtrade should strive towards continual change in the way the industry operates is and Skills (BIS) should show leadership • Paying the cost of must support these efforts in all origins improvement to standards and minimum long overdue. by co-ordinating government action to • DFID should promote and support sustainable production and encourage a race to the top. price setting in order to ensure that the true investigate retailer pricing on bananas international processes such as the – Retailers and banana traders should – Governments in producing countries costs of sustainable production are met as We want to see banana producers receive and evaluate its impact on the long-term World Banana Forum, the Ethical Trading actively support measures aimed at and banana companies must recognise costs change over time, including the full the true cost of sustainable production. interests of banana producers and UK Initiative (ETI) and similar initiatives meeting the true costs of sustainable the important role of independent trade integration of a living wage for workers. This would enable small farmers and their consumers. The government must also production and deliver living wages for unions as the best mechanism for communities to thrive and plantations commit to act on the findings • DFID should encourage the work of trade banana workers. They should agree clear ensuring that fair prices to producers to offer their employees decent working unions and support collective bargaining timetables for the implementation of feed through into living wages for The UK public conditions and living wages. A major • BIS should seek an amendment to the as part of multi-stakeholder processes to these measures workers and the business benefits globally-traded product like bananas should Groceries Supply Code of Practice to establish and support living wages in the – Retailers should invest in educating arising from a mature system of industrial Lastly, but by no means least, the UK public provide opportunities for people to work cover overseas producers that supply banana industry. their customers about the true cost and relations. Governments should also take has a crucial role to play. Over 35 percent their way towards a better future instead major UK retailers through a third party value of a sustainably, ethically-sourced responsibility for ensuring that a national of the bananas bought in the UK are now of trapping them in poverty. Bananas also banana. Competition is important, but minimum wage is set with unions and Fairtrade and this is in large part due to need to be produced in a way that respects • The Office of Fair Trading (OFT)/ The European Union (EU) advantage should come from the quality, employers to ensure it is as close as consumer pressure for ethical sourcing. the limits of the environment and uses Competition and Markets Authority (CMA) efficiency and service offered by retailers possible to a living wage. natural resources more carefully. should launch a market study into the UK action also needs to be coherent with and not from the ability to artificially The efforts of consumers and campaigners banana industry. This should look at how action at European Union (EU) level in subsidise certain products. in buying and promoting Fairtrade over To make this happen there needs to be short term efficiency gains from low pricing order to be effective. The main European The Food and Agriculture many years has demonstrated more clearly enough money to pay for improvements affect producers’ ability to produce, Commission body responsible for • Ensuring a place for small farmers in Organization of than any policy report that the public wants as well as meeting daily production costs innovate and achieve sustainability in the supermarket competition is the Directorate the banana industry the united nations to see fairness and sustainability for banana and a fair income for farmers and workers. medium to long term, and the effect of this General for Competition (DG COMP). – The banana industry must recognise the farmers and workers and is willing to pay for This report has identified a number of on future pricing and UK consumers. role played by small farmers in poverty this at the supermarket checkout. improvements to the ways that bananas • The EU should investigate the retail reduction and contributing to local food – The Food and Agriculture Organization of are produced and traded that would help pricing tactics on bananas of retailers security. Retailers should ensure a fair the United Nations (FAO) should support The voices of consumers and campaigners achieve greater sustainability and fairness, The Department for across Europe, including as part of the proportion of their bananas are sourced the processes of research and data are just as vital today in keeping up the but none of these can be achieved without Environment, Food and Rural current DG COMP study of modern retail from organised smallholders and collection that will enable sustainable pressure for a fairer banana trade and a new approach to pricing and price Affairs (DEFRA) on choice and innovation in the EU food support the efforts of small farmers to costs of production and living wages to be convincing government and the banana regulations. sector, and they should also evaluate the increase productivity and quality through assessed through a commonly-accepted industry to act. By opting for ethically impact of low retail prices on the long- better prices and/or providing additional methodology and transparent and sourced bananas and participating in • DEFRA should work with BIS to term interests of banana producers and investment funds, in similar ways to the independent processes. campaigns such as Make Bananas Fair investigate the effects of downward European consumers. The EU must also Fairtrade Premium the public can add its voice to the calls pressure in value chains on the commit to act on the findings for more fairness and sustainability in the sustainability of UK food and to promote banana industry. the need for transparency by retailers and • The EU should show policy coherence by traders on value at every stage of their taking public policy considerations into supply chains account when applying competition law, for example by stating the relevance of • DEFRA should disaggregate statistics on Articles 11 and 208 of the Treaty of the Fairtrade and Organic from total trade in Functioning of the European Union to bananas and encourage similar action at competition policy European Union (UN) level by Eurostat. • The EU should consider adopting an ombudsman similar to the UK Groceries Code Adjudicator in order to regulate buyer power in the retail industry, starting with bananas.

14 Britain’s Bruising Banana Wars 2/ Executive Summary 15 While they face increasing costs of food, While we are pleased at the progress 3/ ABOUT THIS REPORT 3.1 Fairtrade’s fertilisers and fuel, smallholder farmers’ made in the UK market, the Fairtrade lack of power to influence terms of trade Foundation also wants the presence of means they struggle to earn a decent Fairtrade in the banana market to influence involvement in bananas/ In 2014, the livelihood from their hard work and lack business practices by others in favour of the the resources to invest in the modern, farmers and workers for whom products Fairtrade Foundation is focusing on sustainable farming techniques that like bananas should provide a sustainable would increase their productivity without livelihood and a means of escaping poverty. damaging the environment. Bananas are bananas as part of a three-year campaign an important crop for smallholder farmers in the Caribbean and Latin America. So what’s the problem? to Make Food Fair. The first phase of Bananas are the UK’s favourite fruit. They Fairtrade has a vision of tackling poverty are also important to tens of thousands of through better terms of trade rather than aid the campaign called for a rebalancing workers on plantations who depend on the and of making mutually respectful and fair crop for their livelihoods. These workers trading relationships the norm. However, it of power in the global food system have also suffered from an unfair trading now seems that further progress in realising system. Only 5 – 10 percent of the retail this vision of Fairtrade principles as the norm price of a banana is retained by a typical for trade in products like bananas is being in favour of smallholder farmers farmer who grows itxi. Even before the restrained by an aggressively competitive launch of Fairtrade bananas the product retail environment in which prices have been who produce about 70 percent of the was the subject of high-profile campaigns cut to unsustainable levels. by many of the development agencies who x backed the Fairtrade Mark in response to The price of loose bananas has fallen from world’s food but who receive only a the problems experienced by workers in £1.08 per kilo in March 2002 to just 68p Latin America, especially over the use of per kilo in the UK’s biggest retailers for insecticides that were blamed for serious most of 2013. In January 2014 Sainsbury’s tiny proportion of the prices paid by 3 health problems in workers . and Waitrose raised the price of loose bananas to 79p per kilo but by February consumers in countries like Britain. Bananas have been an important part of the price had dropped again. This report Fairtrade’s story over the past 20 years, seeks to understand how and why this especially in Britain. Since their launch in has happened, the effect of this price 2000 they have been a highly visible symbol competition along the banana supply chain of Fairtrade’s penetration of the mainstream and to offer recommendations for a different retail market. They are available in every approach that would help to make bananas major supermarket and account for about fairer for everyone. 35 percent (by value) of all banana salesxii. More importantly, the ethical case and the business case, for Fairtrade was recognised in moves by three national supermarket chains (pioneered by Sainsbury’s and Waitrose in 2007 and followed by The Co-operative) to make Fairtrade the standard for all the bananas they sell, whether loose or bagged, conventional or organic. As well as increasing the volume of sales for banana producers on Fairtrade terms, it showed that alternatives to conventional trading models can work at scale in the real world.

3 In the 1990s, banana workers from Latin America took out lawsuits against large fruit and chemical companies (Dole, Del Monte, Chiquita and Dow Chemicals, Shell and Occidental) for using Nemagon (Dibromochloropropane) in banana plantations, even though it had been banned since 1977. The lawsuits finally came to a close in 2011, awarding significant compensatory damages to several of the plaintiffs.

16 Britain’s Bruising Banana Wars 3/ About this report 17 The banana here in our region represents 70 percent or 80 percent of employment. If we didn’t have the banana… it would be catastrophic… Imagine if the co-operatives disappeared, how many people would be without a job and what the consequences of that would be.

Albeiro Alfonso ‘Foncho’ Cantillo is a 43-year-old banana farmer from the Magdalena region of Colombia. When the price of He inherited the small plot of land from his father. bananas goes down we Bananas are Foncho’s main livelihood. Getting up at 4am, he spends almost 12 hours a day tending to his banana suffer the impact. Our trees, usually with a friend who owns the neighbouring farm. Foncho sees a close living conditions go relationship between banana prices and his standard of living. down. We need the price As part of the Coobafrio co-operative, founded by his father and other farmers in the late 1990s, Foncho and the other 42 to stay stable. members have been producing Fairtrade bananas for the past two years. Foncho believes it has secured their livelihoods and changed the lives of their families and community: ‘…if we weren’t in Fairtrade we would always be making a loss… we wouldn’t have profitability in our business. Thank God we are in the scheme because if we weren’t… we’d be a group of producers on the way to being out of business.’

18 Britain’s Bruising Banana Wars 3/ About this report 19 Grocer magazine that banana price wars few variable costs within the supply chain The Fairtrade Minimum Price is designed 3.2 Research objectives were costing Waitrose £100,000 per that can be adjusted in response to the to cover average costs of sustainable Preparing for long and approach week, while costing other supermarkets downward trend in export prices. production and is set based on costs of term challenges substantially higher lossesxiii. The same sustainable production and stakeholder The Fairtrade Foundation commissioned this report quotes a banana importer as saying To investigate the complex interactions consultation (see Section 6.3). Producers We have also sought to consider report in order to understand the dynamics that “eventually costs would be passed on between retail prices in Britain, supplying the Fairtrade market also receive what the future may hold for banana affecting the distribution of value in banana to producers in developing countries”. producer prices in countries that supply a premium payment of $55 per tonne (or farmers as far as possible – what new supply chains. We also wanted to assess bananas to Britain and the incomes $1 per 18kg box), which is earmarked for challenges are on the horizon? the impact of the failure to deliver adequate Within the very limited extent that it was of farmers and workers in banana- social and economic investment but can value on the lives of the farmers and possible to discuss trends in the retail producing countries, we analysed the also be used under certain circumstances Bananas, like many other food crops, face workers in countries including Colombia, price of bananas, several retailers said value chains of bananas sold in UK as cash payments for farmers and other serious challenges arising from population Ecuador and the Dominican Republic that that they did not believe there is any supermarkets. forms of economic support for workers. growth and demographic shifts that will now grow most of the bananas sold by UK direct relationship between the costs they On average, 24 percent of the premium is change the demand side of markets, while retailers and their ability to secure long- incurred in procuring products like bananas The established methodologies for such used this way (see Section 4.6.) and this factors such as climate change, water term sustainable livelihoods. We wanted and the price at which they offer them to analyses (described in the section below) has been taken into account in assessing scarcity and rising fuel costs are likely to to examine how far a falling retail price consumers, though most recognised the seek to identify how value is created and conventional market prices against likely have negative impacts on the supply side. translates into problems for producers. sustainability challenges facing the industry distributed among different actors in the costs of production. are linked to the loss of value from the banana supply chain and the impact on All growers are under pressure to achieve We wanted to understand how people chain. Furthermore, these retailers insisted those actors of changes in supply, demand Our report also draws on Fairtrade higher productivity and better quality and who were already struggling to afford food, that they did not seek to fund reductions and other market dynamics. They require impact research undertaken in to reduce water usage, chemical inputs housing and other basic needs were coping in retail prices on bananas by lowering the accurate and up-to-date information Colombia in 2012 and in Ecuador and and wastage. Finding the resources to after a decade of downward pressure on prices paid to growers4 and that they often on costs of production, processing and the Dominican Republic in 2010xiv to make these investments is impossible for the price of the product that provides the absorbed increases in volatile costs such as distribution as well as incomes of workers assess the capacity of farmers and smallholder farmers if the prices they receive source of their livelihoods. shipping within their trading margins. and profit margins of businesses. workers to withstand the downward do not fully cover their costs of production pressures on their incomes given the and provide an income that meets their We also wanted to consider how the While it may not be possible to demonstrate However, such information is hard to increases in their own costs of living. basic needs. structure and trading conditions of the short-term knock on effects of price access as it is regarded as commercially banana market affect efforts to make reductions through the supply chain due confidential by retailers and the companies These are pressures that have been at While it is more feasible for well-capitalised production and trade more sustainable for to a lack of published data, there is a long- within their supply chains. Our research has best maintained, and they have probably banana plantations to fund these farmers and workers. term trend of falling value over the past therefore relied on aggregated international increased since the original research investments, their intensive production decade that cannot be explained purely trade figures from national governments and was conducted, and we also do not take model also faces increasing challenges from We interviewed senior managers in seven by supply chain efficiencies. inter-governmental bodies like Eurostat and account of the need to provide resources crop diseases, climate change, pressure national supermarket chains who have the Food and Agriculture Organization (FAO) for investment in sustainability. on water supplies and other environmental specific responsibility for bananas or a more Our hypothesis is that the declining using the following methodology: factors. Plantations’ heavy reliance on general remit on sustainable procurement value in real terms of banana prices While Fairtrade is not the only channel for agrochemical inputs, the costs of which practices on an individual basis in order to in UK supermarkets has acted as a • We have compared average retail prices such investments, it is the only mechanism are closely linked to the price of oil, understand their views on dynamics in the deflationary pressure on supply chain in the UK with the data for overall volumes that automatically provides independently suggests further pressures on their costs banana value chain. These retailers account value through to the banana growers. and values of UK banana imports on an audited prices and additional resources of production. for over 80 percent of banana sales in the This has contributed significantly to annual basis for each of the last 10 years. as part of banana supply transactions. UK retail grocery market. These interviews eroding growers’ profitability and It has also been possible to adjust these We have not been able to compare the While the extent of these challenges is were only able to consider retail price issues has restricted their ability to invest figures for inflation to present a broad investment level among Fairtrade producers hard to predict, at the level of individual in general terms, as commercially privileged unless they can significantly reduce picture of the decline in the real value of with the more general population of banana countries or producers, everyone we spoke information cannot be shared. their costs. the UK import price for the countries that producers. to in the research for this report agreed that supply most of the bananas sold in Britain banana growers need to invest to meet the We have also considered the extent to Pressure for cost efficiency in itself is not Nevertheless no-one has disputed our challenges of the future. Further study to which the current regulatory framework an unreasonable demand. In many areas • The estimated costs of shipping (based hypothesis that the value that has been quantify these future challenges would on competition helps or hinders efforts of work technological innovation has on the most recent academic research stripped out of the banana value chain in be useful. to achieve a fair and sustainable trade helped provide these sorts of efficiencies, and interviews with banana importers and recent years means that such investments in bananas. This is discussed further in but bananas are still grown in much the ripeners) have then been deducted from are not available from normal operating section 5.3. same way as they always have been with import values to give an estimate of the profits. Investments are therefore subsidised 3.3 Methodological note labour intensive processes at all stages of price available to exporters in different from other activities and are vulnerable to In this report we show a clear long-term production (see Appendix 2), and so even countries of origin. Finally this ‘available changes in trading policies rather than being A full methodological note is included under correlation between retail prices and prices where plants generate higher yields the price’ has been assessed in terms of integrated in a sustainable manner. Appendix 1 to explain the approach used by paid in banana producing countries. labour required for harvesting and packing the extent to which it covers producers’ the research team. remains fairly constant. costs of production, using the research Retailers may well often be selling below undertaken by Fairtrade International to cost in an extremely competitive market, The costs of agricultural inputs and shipping set the guaranteed minimum prices for but details are closely guarded and hard have also risen consistently over the past each origin that are prescribed in the 4 The conversation with retailers was focused on to quantify. In 2009, Mark Price, the Chief decade, so the wages of workers and Fairtrade Standards for bananas. bananas and we did not discuss the extent to Executive of Waitrose, suggested to the the incomes of farmers are one of the which this policy applied to other food products.

20 Britain’s Bruising Banana Wars 3/ About this report 21 But whereas the volume of bananas is now If the price of bananas had simply kept pace Pre-packed bananas are important in terms 4/ THE BANANA VALUE CHAIN 4.1 The UK 60 percent higher than in 2002 (843,446 with general inflation they would today cost of the value chain analysis. When they MT compared to 531,172 MT), the retail £1.40 per kilo. are packed by the grower (some retailers value has grown by only 33 percent (£738 already do this and others are aiming to do banana market/ Bananas are Britain’s million compared to £548 million). This is When compared with price movements this in the near future) they may re-allocate because bananas are such a prominent in other staple food products, the fall in a small amount of the distribution of value favourite fruit. Average consumption feature of the fierce price competition banana prices is even more marked as in favour of producers. More importantly, among supermarkets – one of a number bread, milk, eggs and sugar increased they help to improve quality control and of frequently purchased products that are in price by an average of 79 percent. to reduce wastage. This was highlighted per person is around 100 bananas a year, referred to in the retail industry as Known This means that if the price of bananas by several retailers as having generated Value Items (see Section 5.2). had kept pace with other products in a savings, although no-one claimed these and consumers spend over £700 million a typical shopping basket they would today were significant enough to explain the fall cost consumers £1.93 per kilo. in retail price. 4.2 The retail price of year on them. The volume of bananas sold bananas in Britain Notwithstanding this trend, it is the price of Pre-packed and loose bananas that supermarkets refer to in Britain has grown by an average of 5 The most reliable data on the retail price loose bananas when making price comparisons, and this of bananas is collected by the ONS each provides an important reference point for month for the calculation of the CPI A further complication is that the average trading along the supply chain. percent over the past decade, although measure of inflation. The data is collected price of bananas obtained for the CPI from a sample of several hundred retail includes pre-packed bags of bananas, Since 2002, loose bananas have fallen it has slowed in recent years. outlets and covers the items in a typical which are usually sold at a higher price than in price by 40 per cent in nominal shopping basket. loose bananas. In 2002 most bananas were terms, and a massive 51 per cent when sold loose, so the average price recorded inflation is taken into account. Comparison of the data for the period by ONS of £1.08 per kilo was very close April – June 2002 with the same months to the price of loose bananas in the main in 2013 shows the average price of one supermarket chains. kilo of bananas, (considering both loose and pre-packed), falling from £1.08 to By contrast, in 2013 around half of all £0.86, a nominal reduction of 20 percent. bananas were sold pre-packed in bags, 5 This is a commonly-used term for Tesco, Asda, However, during this period the CPI rose by so while the average price recorded by Sainsbury’s and Morrisons, which account for a cumulative 29.5 percent, and when this is ONS is £0.86 per kilo, loose bananas retail around 70% of UK grocery sales. 5 factored in the fall in the retail banana price in all of the big four supermarkets at just 6 December 2013 prices for loose bananas in Tesco, of bananas in real terms is 38.5 percent. £0.686 per kilo. Asda, Sainsbury’s and Morrisons

% change in UK retail price of basic foods: Q2, 2002 – Q2, 2013 Source: Timetric based on ONS data

22 Britain’s Bruising Banana Wars 4/ The banana value chain 23 Of course, the growth of pre-packing is in Britain struggle to feed their families increasing urbanisation, constraints on not unique to bananas and occurs in all as a result of the continuing squeeze on key natural resources such as land, water kinds of fresh produce, and supermarkets disposable incomes over five years of and oil and the impacts of climate change explain their popularity on the basis of recession and austerity, which has seen will all require us to think more about the the convenience they provide for busy the number of people using food banks food we buy. Transparent pricing and more shoppers. There is a credible case for increase from 26,000 to 128,697 in the past information on the sources of food are vital this, but it is one that runs counter to the three yearsxvii. for consumers to make informed decisions. argument that the agenda of consumers is dominated by low prices. Two supermarkets told us that pre-packed bags at a fixed price of 90p or £1 had Are low prices unique The lack of transparent pricing makes it become their fastest growing lines in recent to the UK? hard for consumers to make good choices years, and their focus groups had identified about their food, whether on the basis of that shoppers on a fixed budget liked the This price reduction has not occurred in value-for-money, nutrition, environmental £1 items because they could easily see other markets in the EU, which buy bananas impact or ethical values. It is even harder for what they were spending as they moved from similar sources and incur similar costs low-income families to make good choices, round the store. Many were afraid that if in shipping and distribution. Over the past and DEFRA’s monitoring of expenditure they bought loose items they might find they decade retail prices for bananas have against a notional ‘Eatwell’ plate (based did not have enough money to pay for their increased by 3.9 percent in Italy, 7.2 percent on the types and proportions of foods that shopping at the checkout. in Germany and 10 percent in France. make a well-balanced, healthy diet) shows that the poorest families spend 22 percent This is a serious matter and shows the The USA banana market is free of tariffs of their food budget on foods that are high caution needed in proposing any increase or import restrictions, making it very in fat or sugar compared to a recommended in the price of basic food such as bananas competitive. Until the end of the last decade 7 percentxvi. The same report shows that the when so many people in Britain are consumption was fairly staticxviii, before rising affordability of food has decreased by over struggling financially. in recent years. In this context retail prices 20 percent for the poorest families in Britain fell until 2007, before partially recovering and as a result of lower disposable incomes and At the same time, it’s important to note that stabilising. Fruit companies succeeded in higher costs for food and housing. it is frequently the consumers who can least persuading North American retailers that the afford to who are subsidising the low price purchase price should cover the costs of Supermarkets also spoke of their of loose bananas. The choices we make production. The import price has increased responsibility to deliver affordable food to about food are going to get tougher for since 2008 to cover the growing costs of consumers at a time when many people many reasons. A growing world population, inputs and transportxix.

Change in retail price of bananas in EU 2002 – 2012 (euros/kg) Source: CIRAD-ODEADOM except for UK (Timetric). GBP:EUR exchange rate from http://fxtop.com/en/ historical-exchange-rates.php

24 Britain’s Bruising Banana Wars 4/ The banana value chain 25 Given that bananas are one of the most 4.3 UK banana imports frequently purchased food products in 2002 – 2013 Britain – Tesco told us that they featured in 90 percent of baskets taken to their After the retail price, the next link in the checkouts – a falling retail price and a static supply chain is the price at import. import cost mean that a significant sum of added value has also been stripped out of Retailers interviewed for this report insisted the UK retail side of the banana market over that the lower retail price for bananas the past decade. This can be demonstrated had not been achieved by forcing price by calculating the difference between the reductions onto producers but had been average retail and import prices for the achieved through efficiencies in supply chain volume of bananas imported into Britain operations and through lower retail margins. on an annual basis.

Individual supply chain information is This value has, in effect, been passed on confidential, but the overall figures for to consumers, and if producers were not banana import volumes and values are losing out benefits for consumers would available from official sources. These have be welcomed. to be adjusted for the effect of inflation in Britain, which has averaged 2.55 percent a However, the decision to adjust the banana year, and also for fluctuations in the sterling/ value chain has been taken by retailers dollar exchange rate (as bananas are traded alone. Producers have had no say in the Average UK import prices per tonne in US dollars) which has shown a slight matter and have received none of the of bananas, 2002 – 2012 improvement, thus offsetting some of the value that has been sacrificed by business Source: Eurostat 8 reduction in the import price expressed actors in Britain. There is probably no better in sterling. illustration of the imbalance of power in $1,400.000 banana supply chains and the lack of $1,200.000 While these figures alone do not illustrate proper governance processes in which the prices paid to producers in those all stakeholders could be involved in $1,000.000 countries as they also include the costs of such decisions. $800.00 import/export and freight, they do indicate that the value that has been stripped out of $600.00 the supply chain and has therefore reduced $400.00 the money available for producers. $200.00 Average UK Import Price, US$ per MT Average $ – 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 7 Average UK import prices per tonne of bananas , 2002 – 2012 Average UK Import Price ($/MT) Average UK Import Price (Adjusted for UK Inflation) Source: Eurostat

2002 2012 % change over period Average UK import £605.54 -19.6% price of bananas Trend in value-added per kilo of bananas, 2002 – 2012 £ per MT £486.33 Average retail price less average import price divided by volume (with adjustment for inflation) £784.02 -38.0% Source: Eurostat import data9 combined with ONS retail price data from Timetric Average UK import $910.04 -15.3% price of bananas £0.70 $ per MT $770.74 (with adjustment for inflation) $1178.27 -34.6% £0.60

£0.50

£0.40

£0.30

£0.20

£0.10

£ – 7/8/9 Basis: imports from Cameroon, Colombia, 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Cote D’Ivoire, Dominican Republic, Costa Rica, Ecuador, Windward Islands. UK Value-Added per kg UK Value-Added per kg (inflation adjusted)

26 Britain’s Bruising Banana Wars 4/ The banana value chain 27 but (for reasons of commercial confidence) 4.4 Changes in banana they would not disclose the changes it Rising transport costs The costs of sustainable 4.5 The impact of supply chain operations had generated in procurement costs. They production are higher than the supermarket price wars acknowledged that it had eliminated much Oil prices (an important determinant of on producers Until the 1990s even the largest retailers of the profit element previously taken by shipping costs) have increased four-fold prices small producers receive, relied on specialist banana companies to specialist banana companies and had over the past decadexx. A study by CIRAD10 handle all the processes from the farm provided opportunities to buy services more in 2011 showed that freight costs are a including in Fairtrade and organic The extent to which individual producers gate and delivery to their stores. As well cost-effectively, but it had also exposed major component of the import price in markets. Producers are only able are affected by the loss of value in the as export/import arrangements, including them to risks previously borne by suppliers Europe, accounting for 15 percent of the banana supply chain depends on the payment of tariffs and shipping costs, such as wastage and fluctuations in import price of bananas from the Caribbean to survive and take less care of volume of bananas they supply to the bananas are harvested and transported currency exchange rates and fuel costs. to as much as 40 percent from Ecuador. UK market. Therefore we need to look at in a pre-ripened (or ‘green’) condition and This further reduces the amount available their land because they lack the where our bananas come from and the then ripened in special plants according However, direct sourcing is not practical for for the purchase of bananas from necessary resources to invest. In prices available to producers in those origin to individual retailer requirements. These smaller retailers, and companies such as producers. The costs of shipping that countries. This has changed considerably processes were largely the preserve of the Marks & Spencer, Waitrose and The Co- should be deducted from the UK import many places productivity halved over the past decade. vertically integrated banana companies operative told us they still see an important price in order to identify the price available such as Chiquita, Dole, Del Monte and role for intermediary suppliers to manage to producers have been estimated from in the past five years. In 2002, 50 per cent of our bananas came Fyffes, which operated plantations and relationships with producers on their behalf. information gained through interviews with from Costa Rica, the Windward Islands, their own fleets of refrigerated cargo ships Also, it is clear that direct sourcing cannot UK banana importers. A producer from the Dominican Republic Colombia and Cameroon. In 2012, there – known as reefers. completely insulate retailers from the rising interviewed for this study had been a big change in countries of origin, costs of shipping and packaging which The likely evolution of the costs of shipping with 54 per cent coming from Colombia, Advances in container shipping, in have to be paid in addition to the price to from the main producing countries of the Dominican Republic and Ecuador. which each container can have its own producers for the bananas. bananas sold in the UK, Colombia, Ecuador refrigeration unit, meant that bananas could and the Dominican Republic (based on the Given the growth in volume of the be shipped on conventional vessels along As retailers increase their control analysis made by CIRAD) are shown below, overall UK market for bananas, this shift with other cargo, thus providing a more over supply chains, the situation of and they indicate that average shipping represents significant gains for Colombia, flexible service that could be obtained farmers and workers is no longer the costs have increased by 44 percent over the Dominican Republic and Ecuador. from general shipping companies such as sole responsibility of banana trading the past decade. Volumes of bananas from Colombia and Maersk. Container vessels are also more companies. Together with banana the Dominican Republic have risen three- fuel-efficient than reefers as their faster traders, retailers now bear a high level fold over the past decade, while Ecuador loading and unloading times mean they of responsibility for the sustainability now sells twenty-one times more bananas can sail at lower speeds between ports. of the supply chain and how producers 10 CIRAD is an agricultural research organisation to Britain than it did in 2002. Conversely, Containerised shipping offered a significant are treated. based in France http://www.cirad.fr/en the three countries that were our largest cost advantage for US importers, but suppliers in 2002 have all seen volumes reefers still account for over 70 percent of fall by between 33 percent (Costa Rica) the banana trade between Latin America and 85 percent (Windward Islands). and Europe.

Cost of shipping to UK from main countries of origin % Changes in origins of bananas imported into Britain 2002 - 2012 Developments in the freight market Estimated costs in US$ per kg Source: Eurostat have enabled some of the UK’s largest Source: Anonymous interviews with UK banana importers supermarket chains to shorten their supply adjusted for CIRAD analysis of inflation 2002 2012 chains for bananas and other fruit by buying more directly from producers in countries 0.35 of origin and contracting the services they Costa Rica 21% Colombia 23% Other 21% need for shipping and ripening – known as 0.30 ‘direct sourcing’. Previously these services would have been provided by a specialist 0.25 Other 37% banana supplier as part of the supermarket 0.20 buying price. Morrisons has worked very Cote d’Ivoire 7% closely with the exclusive sourcing company Windward 0.15 Islands 11% Global Pacific Produce since 2004 and also ripens bananas in their own facility, while 0.10 Belize 6% Asda sources directly (via its International Dominican Republic 19% 0.05 Procurement and Logistics subsidiary) and Cameroon 10% Jamaica 5% Tesco (via its Group Food Sourcing division). Ecuador 12% 0.00 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Dominican Colombia 9% Costa Rica 12% In interviews for this report the retailers that Republic 9% have adopted this type of direct sourcing Ecuador Colombia Dominican Republic all noted that this had given them more control over the value chain of bananas

28 Britain’s Bruising Banana Wars 4/ The banana value chain 29 Winners and losers: Changes in volume of It is therefore possible to look at the trend in bananas imported into Britain 2002 – 2012 UK import prices in the context of the trade By origin (Metric tonnes) with the three largest exporting countries Source: Eurostat that account for over 70 percent of all banana imports into Britain.

200000 As explained in section 4.3, the real value of the import price has declined due to 150000 inflation, and this was illustrated in respect to the trend in consumer prices in Britain. But farmers and workers in Colombia, 100000 the Dominican Republic and Ecuador are affected not by inflation in Britain but by the rising cost of living in their own countries. 50000 Inflation in producing countries has been

Cameroon Jamaica Costa Rica Islands Windward much higher than in Britain; an average 0 of 6.4 percent in Colombia, 8 percent in Ecuador and 21.65 percent in the

Ecuador Dominican Republic. If we look at the UK -50000 Colombia

Cote d’Ivoire import costs from those countries minus the costs of shipping to the UK and track the

-100000 Dominican Republic net value against inflation in the producing countries, we can see how the value has changed over the past decade.

This shows that the price in Colombia appears to be stagnating, while in the UK import prices of bananas from major origins, less Dominican Republic the price when selling shipping costs, adjusted for local inflation 2002 – 2012 to the UK market has fallen by 48 percent US$ per kg (at constant 2012 prices) and in Ecuador by 81 percent. Source: UK import prices from Eurostat, minus shipping costs (estimates by CIRAD, as before) see methodology section (Appendix 9.1) Declining import prices in the UK are mirrored in origin countries. In order to $0.90 understand what this means for farmers and workers we will now consider how $0.80 this compares to the costs of sustainable

$0.70 production.

$0.60

$0.50

$0.40

$0.30 Many fellow producers have $0.20 disappeared because they couldn’t $0.10 $- bear the high costs of production. 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

They had to get out of the market Ecuador Colombia Dominican Republic because everything is going up here. Things are going up and not going down – going up every day.

Smallholder farmer, the Dominican Republic

30 Britain’s Bruising Banana Wars 4/ The banana value chain 31 price movement, with the minimum price Change in Fairtrade Minimum Price from 2002 If we look at the root causes of the lack 4.6 Producer prices vs activated only when necessary. However, of sustainability in the banana sector it’s costs of sustainable too often with bananas industry players treat Country of origin Fairtrade Minimum Fairtrade Minimum Fairtrade Premium product ion the Fairtrade Minimum Price as a market Price 2002 Price 2012 2013 mostly linked to very low producer prices, reference price rather than as the minimum Colombia $5.25 $9.80 $1.00 price floor and starting point for negotiation Ecuador $5.25 $8.85 $1.00 which are mainly due to low consumer There are different ways to calculate the that it is intended to be. prices. Producers do not get paid enough cost of the sustainable production of FOB prices per 18.14kg box of conventional Fairtrade bananas. Adapted from: bananas, depending on how one defines 25 jaar Fairtrade Max Havelaar Bananen Met Toekomst, Max Havelaar Netherlands, 2013 for their bananas so that they can invest ‘cost’ and what is included as necessary Buyers take the in sustainable production methods. for sustainability. Fairtrade Minimum The 2012 prices provide a simple measure For simplicity we will compare the price of typical costs that were applied in that Pascal Liu, senior economist at the Food and available to producers in each of the main Price as a market year which can be compared with average Agriculture Organization (FAO), October 2013 countries that supply to the UK market price when it should prices for sales of bananas (excluding with the Fairtrade Minimum Price and Fairtrade) from the three main producing Fairtrade Premium. be a minimum price countries supplying Britain. The Fairtrade Minimum Price seeks to floor. The Fairtrade Minimum Prices and Premium define a level at which a typical producer used for this comparison are: Banana producer, the Dominican Republic, can operate in a sustainable way based interviewed for this study. on the collection of production costs and stakeholder consultation (see section 6.3). This means that the Fairtrade Minimum Country of origin Fairtrade Minimum Price (US$) Price may be set at a level which does Fairtrade prices are reviewed regularly Per 18.14kg box Per kg not fully meet the costs of sustainable through a research exercise among selected production for some producers. relevant producers using a common Colombia 9.80 0.54 calculation methodology and a process Dominican Republic (organic) 13.50 0.74 This often uncomfortable compromise of stakeholder dialogue which seeks to Dominican Republic (non-organic) 10.90 0.60 partly reflects the intensive deflationary balance the principles of meeting the costs Ecuador 8.85 0.49 pressure felt throughout the banana supply of sustainable production with market Source: Fairtrade International Standards and Pricing Unit chain which can encourage stakeholders access. The last full price research for to resist upward revisions of the minimum bananas was undertaken in 2009, and price for fear of losing sales. In most this was updated in 2012 to take account Fairtrade commodities there is considerable of inflation.

32 Britain’s Bruising Banana Wars 4/ The banana value chain 33 The money earned from banana production is not sufficient, because it is below the cost of basic needs. It is also not enough to cover other family costs such as education and health or for the payment of basic services like water and electricity. A producer from Ecuador interviewed for this study A very significant proportion of bananas Producers supplying the Fairtrade market The combined Fairtrade Minimum Price Colombia appears to come closest to from the Dominican Republic are certified also receive a premium payment of $1 per plus Fairtrade Premium can be compared receiving a price that covers the costs of organic. The country is the number one 18.14 kilogram box ($55 per tonne), which against the average prices paid to sustainable production, but the gap is still exporter of organic bananas in the world, is earmarked for social and economic producers. This allows an estimate of the significant. It seems that Fairtrade may and more than 60 percent of banana investment but which can also be used extent to which prices at farm level are have influenced prices in the wider market. production for export is organic certifiedxxi. as cash payments for farmers and for keeping up with costs of production and Fairtrade accounted for 40 percent of the Almost three quarters of banana producers other forms of economic support for the need for additional social and economic volume of Colombian bananas sold to the in the Dominican Republic are organic – workers in some circumstances. investment to ensure sustainability. UK in 2012xxvi. Some retailers have stated 100 percent in the southern region and 60 On average 24 percent of the premium that they benchmark their prices to the percent in the northern regionxxii. However, is used in this wayxxiii. The average price received by Ecuadorian Fairtrade Minimum Price in plantations in the Eurostat figures for imports do not allow producers from UK importers is very close Colombia, regardless of whether or not they specific volumes and values for organic On plantations, a much higher proportion to the official government support price, are sold with the FAIRTRADE Mark. bananas to be identified, and the average of this premium – 59 percent – is used for which is based on production costs that price calculated for bananas traded on the economic support, but the plantations’ apply only to the largest 10 percent of However, we have not seen independent conventional market (i.e. excluding Fairtrade) share of the premium is 30 percent producers in the country (see Section 7.1), verification of this and note that the other includes both organic and non-organic. To compared to 70 percent for smallholder xxiv and studies in Ecuador show that only benefits of Fairtrade such as the premium make a single comparison with Fairtrade, a organisations, where only 9 percent of the 25 percent of Ecuadorian households payment and environmental and composite of the two minimum prices has premium is used for cash payments. reliant on income from work on banana workers’ rights standards would not been used assuming that just 50 percent plantations earn an income that crosses necessarily apply. of Fairtrade sales are organic ($0.67 per This means that on average $0.01 per kilo the poverty linexxv. kilo). This is a cautious estimate and almost of bananas is used for economic support certainly understates the true picture. while $0.04 is retained for investment. The organic and Fairtrade markets are key for the protective strategy of producers because they offer more stable prices. A producer from Dominican Republic

Average price available to producers compared to Fairtrade Minimum Price in 2012 US$ per kg Source: Fairtrade Minimum Prices and Premium from Fairtrade International. For calculation of conventional price see methodology section (Appendix 9.1)

$0.80 Fairtrade Premium ($0.05 per kg) $0.70

$0.60

$0.50

$0.40

$0.30

$0.20

$0.10

$- Colombia Dominican Ecuador Republic

Conventional sales Fairtrade Minimum (exc Fairtrade) Price

36 Britain’s Bruising Banana Wars 4/ The banana value chain 37 The most important regions for smallholder 5.1 Evolution of the global production are the Caribbean and south 5/ THE MARKET ENVIRONMENT FOR BANANAS banana trade America. In the Windward Islands and the Dominican Republicxxxi, the majority of Low retail prices are not the only factor Most bananas never leave their country growers are smallholders established in of origin. Bananas are the fourth most hilly landscapes prone to run-off erosion important food staple in the world after rice, with limited possibilities of mechanisation, keeping prices low for banana farmers xxxii dairy products and wheat. They play a key irrigation and transport and with high role in food security for many countries. risks of severe climatic events such as and workers. Trade liberalisation is also Their production is often one of the few hurricanesxxxiii. Bananas play a key role in activities that provide households with the preservation of the social and economic very important. To understand how we regular income throughout the year, and the fabric of these islandsxxxiv. trade is a key contributor to the economies of many low income countriesxxvii. Only 15- In Ecuador and Colombia, production is need to step back and take a broader 21 percent of world banana production is more differentiated, and small and medium- exportedxxviii. Countries such as India and sized farmers are integrated into modern look at how the banana trade has Brazil produce mainly for their own domestic export chains. By contrast, production markets and export very little of their crop. in central America and west and central Africaxxxv is far less fragmented, with most changed over the years. Although domestic banana production is exports coming from large plantations dominated by small producers, at least with mechanisation and irrigationxxxvi that 80 percent of exports come from large- are often controlled by multinational fruit scale plantations (between 100 and 4,000 companies. There are also a handful of hectares)xxix. The five leading banana- larger plantations in the Colombian region exporting countries (Ecuador, Colombia, of Urabaxxxvii. the Philippines, Costa Rica and Guatemala) accounted for more than 80 percent of global banana exports. Ecuador is by far the main supplier of bananas in the world market, supplying more than a third of the total volume of bananas traded internationally (see overleaf)xxx.

38 Britain’s Bruising Banana Wars 5/ The market environment for bananas 39 The main markets for exported bananas are north America, the European Community, Japan, Russia and countries in eastern Europe.

Banana exports by region 2003 – 2012 average Banana exports – major countries Banana imports 2003 – 2012 average Banana imports – major countries 14409 thousand tonnes 14711 thousand tonnes

(thousand tonnes) (thousand tonnes) China 3% Asia 15% 5050 Other 24% 5250

EU (27) 30% 4750 4050 4250 Africa 4% 3750 3050 3250 2750 2050 2250 Latin America & Caribbean 1750 81% 1050 1250 Former USSR 750 9% 50 250 Japan 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 7% United States Ecuador Philippines Costa Rica 27% EU (27) Japan Guatemala Colombia Honduras United States China Cote d’Ivoire Mexico Dominican Republic Former USSR

Source: FAO, Commodity markets monitoring and outlook, 2013xxxviii Source: FAO, Commodity markets monitoring and outlook, 2013xl

In response to these production and Main markets Main supply sources consumption patterns, the world banana The Americas Ecuador, Colombia, Costa Rica, Panama (Canada, US, Argentina, Chile) trade follows a regional pattern and can be split into three trading systemsxli: Europe Ecuador, Colombia, Costa Rica, Panama (European Union, Switzerland, Cameroon, Cote d’Ivoire Russia, and countries of the Dominican Republic, Windward Islands, former Soviet Union) Martinique, Guadeloupe Canary Islands Middle East and Asia Philippines (Japan, China, South Korea) Ecuador

40 Britain’s Bruising Banana Wars 5/ The market environment for bananas 41 The World Trade Organization (WTO) However, the expansion of supply and the Growing retailer power in Trade liberalisation reducing harmonised the EU’s banana tariff regime, stagnant demand resulted in a significant fall banana supply chains banana prices which had imposed quotas for different in banana prices (see below)xlv. origins and tariffs for imports above the For most of the twentieth century the This transformation in Europe was levels of the quotas. This was replaced in banana industry was dominated by accelerated by moves by the European 2006 by a tariff-only system, and although vertically-integrated companies that owned Union (EU) to harmonise and liberalise its Latin American bananas currently pay a plantations, operated shipping lines, and market for banana imports. Prior to 1993 higher tariff than traditional origin countries managed import and wholesale activities. individual EU states were able to provide this differential is expected to reduce From the 1970s until the 1990s the global preferential access for traditional suppliers significantly by 2020. banana trade was dominated by five large in the African, Caribbean and Pacific (ACP) companies – Dole (formerly the Standard regions who were heavily dependent The 1993 changes benefited non-traditional Fruit Company), Chiquita (formerly the on those markets. These included the Caribbean suppliers in countries such as United Fruit Company), Del Monte, Fyffes Windward Islands and Jamaica as traditional the Dominican Republic and Belize. At the and Noboa – which at their peak accounted suppliers to Britain and Cameroon and same time, banana traders saw a major for 80 percent of the world banana marketxlii. Cote d’Ivoire as suppliers to France. The business opportunity from a European Over the past 20 years this market share EU was hotly pressed by the US to open market that they forecast would increase has declined to around 60 percent, while up its markets and reduce trade barriers as it opened up to lower cost producers. the influence of large retail buyers, especially for agricultural commodities in the Uruguay Their investment in banana production in Europe, has increased correspondinglyxliii. Round of the General Agreement on Tariffs was higher in this period than at any time and Trade, which was concluded in 1993. in the previous 25 years. The EU market Within Europe there was also pressure from reforms did not lead to an expansion in the Germany for a more open market. volume of banana imports as expected, but the major Latin American exporters to the EU (Ecuador, Costa Rica and Colombia) benefited from changes in the EU import regime, and volumes from Ecuador and Colombia accelerated sharply after the introduction of the ‘tariff-only’ system in 2006xliv (see below).

Banana import volumes per World banana exports and origin into the EU-27 world price indices (base BASIC based on Eurostat data year 1985) 1985 – 2000 (downloaded from Eurostat Source: FAO, The world banana website) economy 1985 – 2002, Rome 2003

1,600,000 250

1,400,000 200 1,200,000 Exports

Ecuador 1,000,000 250 Colombia 800,000 Costa Rica Dominican Republic 600,000 Windward Islands 200

400,000 50 World price 200,000

0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1985 1987 1989 1991 1993 1995 1997 1999 2001

42 Britain’s Bruising Banana Wars 5/ The market environment for bananas 43 In 1999 17 retailers decided to introduce a 5.2 Consolidation of common, independent verification system A brief history of banana Emergence of the The price wars continue supermarket power for their suppliers on good agricultural price wars ‘hard discounters’ and UK price wars practice, which became known as The price wars have also been aggressively EurepGAP. This evolved into a global system In August 2002 Asda, under its new owner Price competition has also been heightened pursued via frequent supermarket called GlobalGAP, in 2007. All of these Walmart, decided to reduce prices on a by the presence of ‘hard discounters’, advertising that focuses on a comparison At the same time, this oversupply in moves further consolidated retailer buying basket of key consumer products, funding a form of retailing that originated in Germany of one chain’s prices for one or two items bananas created the conditions for power in fresh fruit and vegetables, most this through lower retail margins. Loose in the 1960s with the Aldi12 chain and compared to those of its competitors. a buyers’ market. Large European noticeably in bananas. bananas in the UK had been priced at £1.08 its main competitor Lidl. Based on their Every retailer we spoke to told us of the supermarkets were poised to grasp this per kilo for the previous six years, but Asda success in their home market, where they intense and persistent competitive pressure opportunity as part of a strategy to increase This change has been particularly acute in reduced its retail price to £0.94. Tesco, achieved a share of the grocery market of they face to keep retail prices for loose their share of the fresh fruit and vegetable Britain where the concentration of retailing, Sainsbury’s and Safeway followed Asda’s over 20 percent, they expanded across bananas as low as possible. Where retailers market. It has been estimated that with four chains accounting for over 70 lead, and Morrisons took the next step by Europe in the 1970s and 1980s and have attempted to increase loose banana supermarkets accounted for just 33 percent percent of sales (see below), is higher than cutting its price to £0.85, again followed by entered the British market in 1989 and 1994 prices they have frequently reversed their of global fresh fruit and vegetable sales in in other countries. Competition among the other big four chains. In 2003, the price respectively. The discount chains work from decisions after aggressive advertising 1989, but that this had grown to 80 percent UK supermarkets is also fiercer than in fell further to £0.79 per kiloxlviii. A second smaller stores and stock fewer items per by competitors. In this context, one by 2003. most other European markets. In 2005 the wave of price-cutting began in 2007, when category than the main supermarket chains. supermarket described the price of bananas Office of Fair Trading (OFT) found that 93 Asda announced a further round of price This helps them to streamline operations, as a ‘canary’ – or an early warning sign that Many moved their buying from traditional percent of the population have a choice of cuts on 10,000 products. It announced that achieve higher sales per unit of space, and would quickly reveal how one supermarket’s wholesale markets to dedicated supply at least three different supermarkets within this was being achieved by reduced margins buy products in greater volumesli. All of prices compared to the others. chainsxlvi and looked to realise economies a 15-minute drivexlvii). The British market that would cost Asda £250 million. As part these generate savings that are passed of scale. They also required producers to has also seen a marked decline in the use of this initiative bananas were reduced on to consumers in the form of discounts. Several retailers now commit to matching become accredited to standards that would of familiar banana brand stickers such as from 62p to 59p per kiloxlix. Within hours, the prices of their competitors on a typical provide assurance on quality and safety and Geest and Fyffes, which may have made Tesco had responded by promising £270 The main British supermarkets were aware shopping basket. Sainsbury’s innovated enable them to change suppliers as and it hard for Chiquita and Dole to establish a million of price cuts on 3,000 productsl. of the success of the discounters in other by offering consumers vouchers at the when necessary. consumer-facing presence11. 2007 coincided with commitments from European markets and concerned about a checkout to the value of the saving that Sainsbury’s and Waitrose, followed later by similar trend in the United Kingdom. Even could have been made at Asda or Tesco. The Co-operative to source 100 percent now, Aldi and Lidl account for less than Asda responded by offering to beat Fairtrade bananas. 9 percent of the total grocery market, but Sainsbury’s’ and Tesco’s prices by 10 their growth has been accelerating for the percent. These public announcements Market shares of national supermarket chains in UK Source: Kantar Worldpanel past few years in response to the prolonged mean that any of the Big Four supermarkets recession and the squeeze on spending can choose to play ‘beggar thy neighbour’ power for most consumers. with prices by making reductions with the Retailer % share of UK grocery market % change aim of costing rivals money rather than year-on- Aldi and Lidl have also increased the range with the objective of having a sustainable 12 weeks to 12 weeks to year 11/11/12 11/11/13 of products they sell in order to cover a commercial strategy. This concern was lii Tesco 30.5 29.8 -2.3 typical weekly shop . As part of this strategy raised in general terms by several of Asda 17.6 17.2 -2.3 they now sell fresh fruit and vegetables, the retailers individually interviewed for Sainsbury’s 16.9 16.8 -0.6 including bananas. These were explicitly this report. not part of the original ‘hard discount’ Morrisons 11.7 11.5 -1.7 conceptliii, precisely because they did not The Co-operative 6.5 6.3 -3.1 offer the same potential for discounting Waitrose 4.6 4.8 4.3 as manufactured food and household Aldi 3.0 3.9 30.0 products. Most of the retailers interviewed Lidl 2.7 3.0 11.1 for this report agreed that the influence of Aldi and Lidl on the prices of Known Value Items in the big four chains (and therefore on the overall price level across the country) is high, despite their relatively small share of the overall grocery market.

11 Interviews with retailers for this report asked whether the presence of banana brands in the UK market would have resulted in higher retail prices, and this statement reflects the general consensus among those interviewed.

12 The name is an abbreviation of ‘AlbrechtDiskount’ and was introduced in 1962. The Albrecht family had been retailers in Germany since 1913.

44 Britain’s Bruising Banana Wars 5/ The market environment for bananas 45 The EU should address power imbalances in food chains by more effectively applying its competition law to address the creation, maintenance and abuse of buyer power not only to protect suppliers, particularly in developing countries, from the impact of abuses of dominant positions, but also to ensure to the longer term stability of supply for consumers. Olivier De Schutter, United Nations Special Rapporteur on the Right to Foodlxiv competition law, companies bar their staff concerns raised in its 2000 report were It is also clear that no single retailer 5.3 The impact of competition from any discussion of pricing policies or still ongoing. Although the primary focus Competition law would be able to address the long- > What needs to happen? law on banana prices practices except in the most general terms. of the commission’s investigation was term decline in value alone, though whether supermarkets offer customers a The current approach to competition law there is still much that they can and Market regulation needs to achieve Retailers do not operate in a vacuum but fair deal, the Competition Commission (favoured by the OFT and the EC) assumes should do. Government also needs to a better three-way balance between within a context of government regulation. Do regulators challenge had serious concerns about practices that a narrow definition of consumer interest acknowledge the problem and help to the right of the public to long-term What does this look like, and how far does retailer power, and in place unreasonable pressure on suppliers. which focuses almost entirely on price rather resolve this impasse. sustainable food supplies, the right it help banana producers? whose interests do they These practices are ultimately bad than broader consumer interest in long-term of the public to affordable food and challenge it? for consumers because they stifle sustainable and ethically sourced food. Many retailers are engaged with the World the rights of producers to sustainable In the UK the Department for Business, competition and innovation. The OFT and EC are powerful actors in this Banana Forum, an initiative sponsored and fair prices. If we are serious about Innovation and Skills (BIS)liv oversees work The competition authorities have long sphere, but their approach is not in line with by the Food and Agriculture Organization sourcing our food sustainably and to enforce fair trading and competition law. recognised the fact that the supermarket This prompted the Groceries Supply many EU court judgements or the wishes of that brings together large producers, small treating all in the supply chain fairly The main bodies implementing these rules sector is an oligopoly (a market form Code of Practice (GSCOP) in 2010 and the Member Stateslxii, nor is it in line with the farmer organisations, trade unions, banana then government will need to show are the Office of Fair Trading (OFT) and the dominated by a small number of sellers) and the appointment of a Groceries Code original aims of EU or UK competition lawlxiii. companies, retailers and civil society leadership and policy coherence across Competition Commission (CC). In 2014 have been keen to protect consumers from Adjudicator (GCA) in 2013, which was organisations to work for a sustainable departments (including the OFT/CMA) the competition and markets functions of the potential for this to be abused. supported by a wide number of farmers’ This line of judgements from the EU courts banana industry. They spoke positively so that regulation supports rather than these bodies will be merged into a new groups, Non-Governmental Organisations is supported by explicit demands in EU about the value of multi-stakeholder undermines these goals. Competition and Markets Authority (CMA), But in fact the supermarket sector is also an and members of the Food and Drink treaties that a high level of environmental dialogue and collaboration – but only on which will have the aim of making markets oligopsony (a form of imperfect competition Federation. The British Retail Consortium, protection requirements (including ‘pre-competitive issues’ since discussion of Government regulation at UK and work well for consumers, businesses and arising from the dominant power of a small lobbying on behalf of its largest retail prudent use of worldwide resources) pricing policies is strictly off-limits. It seems European Union (EU) levels needs the economy. UK regulationlv is based number of buyers), in which retailers have a members, opposed the appointment of the ‘must be integrated into the definition that although price is the most pressing to be rebalanced in order to ensure upon European competition lawlvi, which high measure of power over the producers adjudicator on the grounds that it would and implementation of the Union policies problem facing producers, discussions that the rights of banana producers is enforced by the European Commission they buy from. In this context, do regulators add unnecessary costs to the supply and activities, in particular with a view to about price cannot be part of the to protection from excessive price (EC) as the regulator of the single European protect producers as well as consumers? chain as there had been no complaints promoting sustainable development.’lxv solution under current interpretations competition are upheld. We set out market. The EC’s Competition Directorate under the GSCOP in its first two years Similar provisions relate to poverty reduction of competition legislation. detailed recommendations for this in has wide-ranging powers to investigate of operationlxi. This ignored the concerns and development co-operation. the conclusions and recommendations anti-competitive practices that have The Groceries Code raised in the OFT’s 2004 report that the So while we would like to see retailers sections of this report. cross-border implications. The OFT (CMA) Adjudicator lack of complaints under the voluntary code However, all of the stakeholders we spoke take the initiative to buck the trend enforces UK and EU competition law may actually be a symptom of the code’s to, including retailers, are concerned that and break out of the price war that within the UK. A Competition Commission report into the ineffectiveness. the current trading models for bananas do has progressively depressed prices supermarket sector in 2000 highlighted not return sufficient value to producers to to unsustainable levels, if they are a number of concerns about the buying allow them to invest in meeting emerging unwilling – or unable – to do so, then How does competition power of the large supermarkets. Will the GCA tackle sustainability challenges and to improve government has a clear responsibility to law work? This led to a voluntary code of practice to price wars? ethical standards of production, including facilitate a transparent and responsible protect suppliers being adopted by Tesco, the delivery of living wages. Regulators are approach to investigate the situation The presumption of competition law at both Sainsbury’s Safeway and Asda. In February The GCA is intended to provide suppliers, aware of this tension between competition and, if necessary, act on its findings to UK and European levels is that effective 2004 the OFT published a report on the including overseas suppliers when they are law and sustainability goals. An OFT correct any imbalances that undermine competition is manifest in low prices for how well the code was workinglviii. This directly supplying retailers, with a better roundtable discussion in 2010lxvi suggested government goals to drive ethical and consumers, and conversely that artificially- report found a widespread belief among channel for complaints if they believe they that ‘a broader definition of benefits to responsible business and long-term high prices reflect a lack of competition. suppliers that the code had not brought have been unfairly treated. The GCA has consumers, including future generations and food security. In general the law therefore strictly prohibits about any change in supermarket behaviour. the power to fine retailers for breaches of therefore sustainability issues, would allow any form of concerted action by businesses the code. inclusion of wider policy objectives so that Market regulation needs to achieve a that may affect trade, and specifically any Suppliers were afraid that complaints competition law isn’t a block on ‘desirable better three-way balance between the agreements or practices that ‘directly or under the code would result in them being However, the focus of the GCA is primarily social goals’’. right of the public to long-term sustainable indirectly fix purchase or selling prices or de-listed by the supermarkets or being on contract terms between grocery food supplies, the right of the public to any other trading conditions’lvii. Harsh required to trade with them on worse retailers and their direct suppliers, and so The Scottish Government has recently affordable food, and the rights of producers penalties have been introduced for breaches termslix. The OFT could find no evidence the adjudicator brings limited benefits for legislated to impose a minimum price per to sustainable and fair prices. Government of these laws, including fines of 10 percent of supermarkets behaving in this way primary producers who do not deal directly unit of alcohol. So far, challenges to the will need to show leadership and policy of worldwide turnover of the firms involved, but noted that the ‘climate of with supermarkets. legality of this move under EU competition coherence across departments so that up to five years in prison and disqualification apprehension’lx among suppliers extended law principles have been unsuccessful, regulation supports rather than undermines of company directors. In principle it is to not allowing even their trade associations Moreover, the GCA and other UK though challenges are ongoing. This case the goals of sustainable sourcing of food possible to justify such arrangements where to raise matters on their behalf. Four regulators do not have the mandate to suggests that it is possible for governments and fair treatment of farmers and workers companies agree to achieve appropriate trade associations responding to the OFT consider a structural decline in price to apply wider social goals in the context of in overseas supply chains. goals proportionately (and without consultation refused to allow it to reveal such as that seen in banana retail or the retail pricinglxvii. eliminating competition), but it is difficult to their names or even the sectors in which long-term harm to primary producers satisfy the exemption test where competing they operated. and the potential harm to long term sellers agree the price at which they sell a sustainable agricultural practices that product or the quantities they sell. Given the A further enquiry by the Competition may result from retailers stripping value substantial risks involved in any breach of Commission in 2008 said that many of the out of the supply chain.

48 Britain’s Bruising Banana Wars 5/ The market environment for bananas 49 income to make significant investments. 13 http://www.fairtrade.net/fileadmin/user_upload/ 6.1 General background to If a producer is certified as Fairtrade but content/2009/resources/140112_Theory_of_ 6/ FAIRTRADE’S ALTERNATIVE APPROACH the Fairtrade system only sells a small percentage of goods on Change_and_Indicators_Public.pdf Fairtrade terms while relying on conventional 13 14 Impact studies are published on the Fairtrade Fairtrade is an alternative To be certified as Fairtrade producer sales for the rest, the economic impact International website: www.fairtrade.net organisations are required to comply can be limited – hence the importance of approach to conventional trade. with a number of social, economic maintaining demand for Fairtrade produce. and environmental criteria and function democratically and transparently as By choosing Fairtrade, consumers representatives of their member farmers 6.2 Fairtrade bananas – create the public demand for and workers. scope and scale Today Fairtrade is a global system that At the end of 2012, 110 banana producer certifies 1,149 organisations in 70 countries, organisations in 15 countries worldwide products that offer organisations representing 1.3 million farmers and were certified to Fairtrade standards, workers. Standards exist for over 300 including 64 small producer organisations of farmers and workers guaranteed products that are sold in 125 countries, (representing 17,512 farmers) and 46 hired generating estimated sales in 2012 of labour organisations (i.e. plantations with €4.8 billion and providing over €80 million a total of 7,100 workers). The majority of terms of trade, more stable and in Fairtrade Premiumlxviii. 2014 marks the Fairtrade banana producer organisations are 20th anniversary of the FAIRTRADE Mark in Colombia and the Dominican Republic. adequate prices and the use of a in the UK. The table below contains disaggregated Many independent studies have been data based on 2011 figures, therefore the sales–related Fairtrade Premium. undertaken in recent years to study total figures in the table below differ from the impact of Fairtrade on farmers and those in the paragraph above. workers14. One such report commissioned by two Fairtrade organisations in 2011lxix highlighted that one of Fairtrade’s strongest contributions to rural development comes from farmers’ and workers’ ownership of decisions on how to use the Fairtrade Retailer Small Farmers Hired labour Workers Premium on projects that benefit the whole producer organisations community such as improving access to organisations health and education. The study also Colombia 9 420 21 2010 found higher productivity and income levels Dominican Republic 12 1980 12 1830 among members of Fairtrade certified Peru 12 4710 0 0 producer organisations, as well as increased Ecuador 6 2330 1 280 levels of investment in comparison with Windward Islands 2 3560 0 0 non-certified settings. Other (Costa Rica, 2 300 3 780 Mexico, Panama, The study also showed that on its own Ghana, Philippines Fairtrade certification provides a platform Totals 43 13300 37 4900 for initiating rural development and poverty reduction. In order for a broader and Source: Fairtrade International – Monitoring the scope and benefits of Fairtrade, 4th Edition, 2012 deeper development impact to be achieved organisations need support and investment to ensure farmers and workers are aware of Fairtrade and how it works so that they can participate in decision-making. This will also strengthen leadership and technical and Over the past three years, Fairtrade banana commercial capacities so that efficient and sales have evolved as shown below: effective services are provided to members.

2010 2011 2012 Most importantly, organisations need to sell Sales volume (MT) 294,400 320,923 331,980 a significant proportion of the products they % available production of 52.5% 65.2% Not available grow under Fairtrade conditions so that certified producers members receive a stable income that at

least covers their basic needs, and so that Source: Fairtrade International – Monitoring the scope and benefits of Fairtrade, 4th Edition, 2012 the organisation receives sufficient premium (excerpt for 2012 sales volumes from Fairtrade International Annual Report 2012-13)

50 Britain’s Bruising Banana Wars 6/ Fairtrade’s alternative approach 51 There are companies that are paying $6.50 or $7. In Fairtrade, we are at $9.30. The difference is over $2, which we can use on fertilisers.

Smallholder banana farmer, the Dominican Republic

level which does not fully meet the costs of For workers on large plantations, Measures to protect temporary workers As a result, even though in some contexts 6.3 Fairtrade: the benefits sustainable production for some producers. Fairtrade standards require conditions are important in banana production, as studied the wages achieved by the Fairtrade > What needs to happen? and constraints for of employment that at least meet one effect of the downward pressure workers cover basic needs, Fairtrade farmers and workers The value of the Fairtrade Minimum legal minimum requirements, with on prices has been the casualisation of workers also receive significant economic This report does not claim that Price is experienced by small producer specific safeguards on occupational employment as a way of reducing labour benefits through the Fairtrade Premiumlxxviii Fairtrade is the only route to a organisations (co-operatives or health and safety, no child or forced costs (discussed further in Section 7.3). which are not available to workers on sustainable banana industry, but Fairtrade’s overall impact comes in two associations), for whom the guaranteed floor labour, freedom of association of Casual workers are far less likely to receive non-Fairtrade plantations. we believe it has achieved a deeply ways: Change through the standards and level provides a safety net for their role as the workforce, access to collective the legal minimum wage or bonus payments positive impact in its work with many the economic change that comes as a result an intermediary between their members and bargaining processes, and non- (which can be an important element of total Fairtrade also contributes towards different producer organisations. of trading on Fairtrade terms. exporters. If the market price is higher that discriminatory employment practiceslxxiv. earnings) or have access to social security improvements in workers’ working This experience would provide valuable the Fairtrade Minimum Price then producers Fairtrade seeks continual improvement and healthcare benefits (where available). conditions. The Colombia study found learning for the wider banana industry Both of these dimensions are closely receive the market price. This guaranteed beyond the minimum entry level in most improvements in workers’ health through in achieving genuine sustainability. connected. Impact can be increased by price can help them obtain finance to pay of these areas. The entry-level requirements A study conducted by the IDS (Smith: 2010) better access to personal protective In the next section we call for a shift strengthening the requirements of the their members regularly. are broadly similar to the standards in Ecuador, the Dominican Republic and the equipment, occupational health services from ‘business as usual with minor standards (e.g. when minimum prices applied by the Ethical Trading Initiative’s Windward Islands showed that the workers and hygiene facilities for sanitation, incremental improvements’ or premium payments are increased or Improved cashflow for smallholders Base Code and are based on the employed on Fairtrade-certified plantations handwashing and meals. Workers on the to fundamental change in the toughening up environmental regulations). belonging to co-operatives was a noticeable International Labour Organization earn wages that are in line with industry non-Fairtrade plantation were found to have business model. When taking such steps Fairtrade also finding of recent research in Colombialxxi. (ILO) conventions. averages, but that workers generally receive higher levels of sick leave, one of the factors needs to take into account market This research also found that small farmer higher income than their counterparts that was identified as a business benefit for conditions. co-operatives supplying the Fairtrade Similarly, Fairtrade standards on wages outside Fairtrade once wage-related plantation owners in improving conditions market were more likely than other require workers to receive the highest of benefits (e.g. bonuses, social security) are for workerslxxix. producers to have contracts with exporters three reference benchmarks: the legal taken into accountlxxvi. The Corporation The Fairtrade Minimum Price and, as they gained experience from these minimum wage, average wages for the for Rural Business Development (CODER) A summary of recent field-based impact relationships, to be able to negotiate better sector or local area, and rates agreed study in Colombia surveyed three Fairtrade studies analysing the benefits of Fairtrade The Fairtrade Minimum Price seeks to prices and trading terms. through a Collective Bargaining Agreement plantations and one non-Fairtrade plantation and areas for improvement is provided cover the average costs of sustainable with an independent trade unionlxxv. as a control and found that 100 percent of in Appendix 3. production for the relevant product. Fairtrade co-operatives in Colombia While wages on Fairtrade certified the workers on the Fairtrade plantations had A typical producer (farmer or plantation are currently forming a joint venture – banana plantations may not therefore permanent employment contracts against worker) should be able to operate in a ‘second tier’ co-operative – to improve be higher than on other plantations as a just 16 percent on the control plantationlxxvii. a sustainable way without systematic their negotiating position with a view to general rule, there is a significant benefit to economic losses while contributing to a also moving up the value chain and acting workers from Fairtrade’s requirements for Historically, many Fairtrade plantations have higher overall income (which requires that as an exporter of Fairtrade bananaslxxii. employees to be provided with permanent also used the Fairtrade Premium for cash the price level needs to consider market The Fairtrade Premium helps provide contracts and employment rights such or in kind payments and to cover the costs acceptance)lxx. Prices are based on research investment for these kinds of improvements, as holiday pay, sick leave and maternity associated with housing, healthcare and and consultation among selected relevant and 67 percent of the premium received pay. Temporary workers are permitted, education. These payments represented producers using a common calculation by small banana producers in 2010/11 but they must be paid the same rates as 59 percent of the Fairtrade Premium use methodology followed by a process of (€6.6 million) was spent on business or permanent workers and must receive a legal in hired labour banana producers in 2011, stakeholder dialogue. This means that the organisational development, production employment contract no later than after or €2.48 million, an average of €500 Fairtrade Minimum Price may be set at a and processinglxxiii. being in service for three months. per worker.

52 Britain’s Bruising Banana Wars 6/ Fairtrade’s alternative approach 53 GOING ORGANIC IN THE DOMINICAN REPUBLIc Jetta Van Den Berg is the owner and SAVID does not sell directly to President of SAVID, a banana producer in supermarkets, but to intermediary ripening the Dominican Republic. Jetta explains the companies. But supermarket price wars are set up: ‘We have our own farms and also still a worry. Jetta says: ‘Buyers are under work with small producers. On our own a lot of pressure to negotiate the best price farms we have 400 workers. We also work possible. They are working in a context with six small farmers’ organisations and where bananas are used for price fights associations. We run model farms to teach between supermarkets.’ She sees a lot of good farming practices.’ The Dominican pressure from buyers to pass costs on to Republic is an important origin for bananas, producers. ‘We experience problems after with around 30 percent of SAVID’s contracts have been agreed, asking for production going to the UK. Jetta says: retrospective discounts,’ she adds. ‘For the last few years we have been selling roughly 50-60 containers of bananas per If it were not for the Fairtrade and Fairtrade week. 75-80 percent is Fairtrade and Organic bananas the producer sells Jetta 75 percent is organic. Most of the is sure that SAVID would be in trouble. She conventional Fairtrade bananas go to the says: ‘The conventional market does not UK, and most of the organic Fairtrade pay the amount we would need to meet bananas go to Europe.’ costs of production. With the Fairtrade Minimum Price it is enough to cover costs.’ As SAVID’s owner, Jetta has clear sight of She also speaks proudly of the ways in the pressures on the banana trade, and which the Fairtrade Premium has been top of her list is the need for long-term used: ‘This has been used for housing, commitments from buyers. ‘A major issue is medical care, and education programmes, ensuring commitments to volume. Volumes among other things,’ she adds. are not guaranteed but can go up and down quickly from 6,000 to 30,000 boxes per week which is unworkable. Supermarkets run tenders every year, but for stability we need five-year contracts,’ she says. GlobalGAP than it is for large plantations. sales. In the Windward Islands Fairtrade 7.1 An inclusive market While the liberalisation of the EU market, has been critical to the survival of banana 7/ ACHIEVING A SUSTAINABLE for smallholders the decline of the vertically-integrated fruit farming, helping smallholder farmers companies and the use of containerised to become organised, upgrade their BANANA INDUSTRY Given the Smallholder farmers are forced to match shipping have removed many of the production to meet supermarket quality the prices set by larger actors in the historic barriers to entry for producers, requirements, and improve livelihoods. significant increases in costs industry and so they make less of the profit the standards imposed by retailers have However, repeated damage to the industry which is the source of income for their created additional costs that can be hard from hurricanes and disease coupled families and the investment finance for their for small producers to meet. with the pressure on price means that of production and costs of businesses which might allow diversification. even with Fairtrade farmers are still Smallholder farmers cannot survive in the Today, the Fairtrade market is one of struggling to secure ongoing and stable living, smallholder farmers’ current banana market and cannot afford the few that remains accessible and market accesslxxxii. to leave it. economically worthwhile for small farmers, though even within the Fairtrade system Fairtrade has also demonstrated that it is income is under pressure in For example, the official support price set by some smallholder farmers are struggling possible to manage a system in which small the Ecuadorian government is based on the to maintain sales as competition with farmers and plantations co-exist. Although all of the countries studied. estimation of the average costs of a typical other origin countries rises. In addition, there has been a significant increase in industrialised plantation in Ecuador (> 50 Fairtrade is one of the only systems the number of certified plantations in the Ha), with a productivity of 1,800 boxes/ha/ offering market access for the banana Dominican Republic and Colombia over the year, even though 90 percent of producers agroforestry producers, who have the past five years, the overall global market in the country operate farms that are smaller lowest productivitylxxxi but farm in a way share of Small Producer Organisations has than 50 hectareslxxx and over the past 10 that maximises the protection of the so far remained stable (see below). years the price available to producers from environment. exports to the UK has reduced to a level However, the continuing deflationary close to this official minimum price. In Ecuador Fairtrade has helped people who pressure, caused in part by UK supermarket were once seasonal migrant labourers to prices, is challenging this delicate balance, It is also much harder for small farmers to become fulltime farmers on their own land. and as a result small producers are very comply with the requirements and afford In Colombia Fairtrade certified co-operatives worried that they will be displaced from the certification of standards such as are achieving high rates of productivity and the market by plantations.

Global sales of Fairtrade bananas (Metric tonnes) Source: Fairtrade International – Monitoring the scope and benefits of Fairtrade, 4th Edition, 2012

350000 Hired labour 100500 organisations 108100 300000 103600 Small producer organisations > What needs to happen? 250000

Retailers should ensure a fair 220800 200000 203400 proportion of their bananas are sourced 190800

from smallholders and support the 150000 efforts of small farmers to increase productivity and quality through better 100000 prices and/or providing additional investment funds in similar ways to 50000 the Fairtrade Premium. 0 2008 2009-10 2010-11

56 Britain’s Bruising Banana Wars 7/ Achieving a sustainable banana industry 57 These hidden external factors distort price tanks, roads, street lights), paying the Consumers do signals along supply chains and increase salaries of public sector workers (e.g. 7.3 Decent work not care where the the economic pressures on smallholder teachers, doctors, nurses) and providing farmers. As a result, worldwide rural educational and medical supplies. In some The price pressure generated by banana banana comes from, societies are facing a major demographic instances, producer organisations were value chains has pushed many employers to shift and migration to urban areas (see working in partnership with civil society transform permanent jobs into casual work but only if it is nice below) as farming becomes an increasingly organisations and local authorities, which or outsource them in order to decrease and cheap, there is unattractive option for young people and should help to strengthen the institutions labour costsxci. The decreasing unit value their parentslxxxviii. To compensate for the required for sustainable rural development. of exports to the UK is likely to strengthen no awareness of the resulting labour shortages large plantations this trend, especially in Ecuador and the require a larger pool of migrantlxxxix and Through improving small producer and Dominican Republic where only large effort of the small casual workers in agriculture and food worker incomes and generating business plantations can make profits when selling producers. processingxc. for agriculture-related markets and services to the UK. Fairtrade was having an impact in stimulating local economies. One way of doing this is to replace A trade union representative from guaranteed hourly wage rates with piece Costa Rica interviewed for this study Fairtrade’s support > What needs to happen? work rates, which enables employers for smallholders to transfer productivity risks to their The banana industry must recognise employees: workers have to work whatever One of Fairtrade’s most significant the role played by small farmers in time it takes to earn the minimum wage impacts has been in contributing to the poverty reduction through creating (rather than the specified eight- hour period), strengthening of smallholder co-operatives. employment opportunities (especially and in cases where there is no work to do, In the CODER study in Colombia four of the for young people) in rural areas and they are not paid at allxcii. six co-operatives studied have increased contributing to local food security. their membership in the last three years, It is important that farming communities Plantations are also increasingly hiring and the benefits they derive from Fairtrade thrive and provide places where young workers for limited (and repeated) periods is a major contributory factor in this rise. people want to live, work and raise of three months, thereby reducing the The Fairtrade Premium has funded qualified future generations. These goals are number of permanent workersxciii. administrative personnel with business more likely to be achieved when small 7.2 Thriving banana orientation who have then developed a famers are able to work together to A notable example has been documented farming communities broad portfolio of services delivered by build knowledge, good agricultural by Sindicato de Trabajadores Plantaciones the co-operative that are greatly valued practices and market linkages through Agricolas (SITRAP) in Costa Rica, where the Despite rapid urbanisation and an increase by member farmers. The study also found democratic organisations such as co- numbers of permanent contracts fell from in large-scale commercial farming, much that Fairtrade has contributed much to the operatives. These organisations need approximately 80 percent in 2000 to around of the agriculture around the globe is still revitalisation of the regional economy in better support and investment. 40 percent in 2006xciv. in the hands of small-scale producerslxxxiii: the Magdalena banana zone in Colombia 2.5 billion people worldwide depend on through higher farmer incomes, investment agriculture for their livelihoods (500 million of the Fairtrade Premium in a range of smallholder farms support 2 billion people business and social projects, and job worldwidelxxxiv and 450 million workers creation. This spending had created a globally work in agriculturelxxxv). multiplier effect by stimulating local demand for goods and services. Smallholders also A significant body of empirical studieslxxxvi reported that their link to Fairtrade helped shows the positive multiplier effects of them to overcome the social and economic small-scale famers in local economies. crisis left by internal conflict in the country. Through creating employment opportunities (especially for young people) in rural areas The Colombia study echoes the findings and contributing to food security they play of a study by the Institute of Development a key role in poverty reduction. Studies in Ecuador, Colombia and the Banana workers in Costa Rica now earn Conventional markets also fail to take into Dominican Republic (Smith:2010) that less than enough to buy their households’ account the long-term costs of large-scale co-operatives performed a number of intensive farming. Several international important roles, from facilitating production basic needs. Thirty years ago they were studieslxxxvii have documented the external of high-quality fruit for premium markets to costs to local communities from the promoting sustainable rural development not only able to pay for this with their industrialisation of agriculture. These include through investments in social and banana wage, but also for their leisure the costs of pollution generated by chemical environmental programmes. Fairtrade inputs, the related health costs on farmers contributed to social and community activities, even holidays. and workers, and the unpaid costs of the development at the local level via use depletion of natural resources and the loss of the premium for constructing public A trade union representative from of ecosystem services. infrastructure (e.g. schools, clinics, water Costa Rica interviewed for this study

58 Britain’s Bruising Banana Wars 7/ Achieving a sustainable banana industry 59 As permanent contracts became scarcer, differences in some countries. Evidence which enables many families to achieve a Ecuador and the Dominican Republic. plantation work has become increasingly presented in this report points to some 7.4 Living wages more sustainable livelihood. In early 2012 the World Banana Forum’s unattractive to local workers, thus advantages that workers employed in permanent Working Group on the increasing the inflow of migrant workers Fairtrade plantations have in comparison to The declining real value of the export price Some retailers have stated that they Distribution of Value along the Chain in several countries. The vulnerability and their non-Fairtrade counterparts. Fairtrade’s of bananas in most producing countries, benchmark their prices to the Fairtrade commissioned a comprehensive survey of discrimination experienced by Nicaraguan revised Standards for Hired Labour settings combined with increases in living costs as a Minimum Price to plantations in Colombia the wages and livelihoods of 199 families in migrants in Costa Rican plantations, (introduced in January 2014), strengthen result of local inflation clearly makes it hard regardless of whether or not they are sold Ecuador across both small to medium farms Haitians in the Dominican Republic and requirements for employers in a number for workers to achieve progress in earnings, with the FAIRTRADE Mark. However, we and large plantationsci. Analysis of the overall central American migrant workers in Belize of areas including strengthened rights of and in most regions there is an increasing have not seen independent verification income of families where one member was are all clear illustrations of this situationxcv. freedom of association and trades union gap between what workers need to provide of this and note that the other benefits of employed in banana production showed engagement and clearer timetables for properly for themselves and their families Fairtrade such as the premium payment and that the ability of families to achieve a ‘living At the same time, plantations have used employers to introduce living wages. and the wage rates on banana plantations. environmental and workers’ rights standards wage’cii for the household depended on: sub-contractors and temporary agencies as would not necessarily apply15. This has a way of distancing themselves from their On Fairtrade certified plantations the trend A notable exception to this trend is not fully insulated Colombian workers from – the level of formality of the employment, responsibilities under labour lawsxcvi. towards employing workers on a casual or Colombia, where Sintrainagro, a strong international price pressures. The CODER which is higher in large plantations In Colombia, the trade union Sintrainagro temporary basis has been stemmed. The independent trade union, represents studyxcix found that unions had actually – the capacity for family members to earn has so far headed off attempts by IDS study in Ecuador and the Dominican around 80 percent of banana workers in agreed to a reduction in wage rates in 2012 additional income or have multiple jobs, employers to contract workers through Republic in 2008 showed the progress the country, and a system of more mature and that rates had not increased in 2013. which is greater for workers in small and so-called labour co-operatives (a form that had been made in these respects on industrial relations has translated into above This was cited as an example of a system medium-size farms of casualisation), but the continuation Fairtrade plantations over a six year period average working conditions and wages for of mature industrial relations, but it has not of the price war in markets such as the (2002 – 2008). banana workers compared to wages in been without its challenges. During 2013 Overall, only 25 percent of banana workers UK increases the attractiveness of such Colombia as a whole and better terms of Colombian workers threatened to go on in Ecuador earn a living wage for their approaches for employers. > What needs to happen? employment compared to other countries in strike because of the pressure on wagesc. household and, in many cases, workers or the region (see below)xcvii. The level of wages family farmers still found themselves with The Colombian model of mature industrial The banana industry must minimise in the Colombian banana sector is therefore By contrast other studies have found a income below the poverty line, fostering relations is under direct threat if price the use of temporary contracts and closer to the benchmarks for living wage, shortfall against the living wage in both a spiral of negative social consequences. deflation continues to be driven by the ensure all temporary workers receive UK retail price decline, particularly since a full entitlement to bonuses and non one-third of all bananas from Uraba, in wage payments such as healthcare and Colombia, are sold in the UK market. social security provisions enjoyed by Hired labour contexts are challenging, and permanent workers. Fairtrade has only started to make small What we need to ensure true sustainability is a living wage both for workers and small Increase in number of workers on indefinite contracts on Fairtrade plantations farmers. Source: Fairtrade Bananas: A global assessment of impact Marike de Pena, General Manager of Banelino (Dominican Republic) Comparison between the minimum wage and Average wage Year of FLO Ecuador Dominican Republic and President of CLAC (The Fairtrade the average wage in banana regions per month Minimum wage Cert inspection Source: xcviiiAugura (2013) Producer Network for Latin America and the Caribbean) 2002 Total workforce 281 160 (not including management, foreman and

administrative staff 969.181 1,000,000 940.952 920.037 919.197 Number of permanent 193 but no written 0 900,000 workers contracts

792.942

800,000 749.823 Permanent workers 69% but no written 0% as % of total at start contracts 700,000

600,000 566.700 535.600

2008 Total workforce 346 160 515.000 496.900

(2006 for 500,000 461.500 433.700

Number of permanent 258 with written 150 408.000 Dominican workers contracts 400,000 Republic) Permanent workers 75% 94% 300,000 as % of total at start 200,000 2006 2007 2008 2009 2010 2011 2012

60 Britain’s Bruising Banana Wars 7/ Achieving a sustainable banana industry 61 In the Dominican Republic migrants from workers, even though nothing in the national Haiti have made up much of the agricultural legislation prevents migrant workers from labour force since the 1920s, but the joining a unioncvi. In 2012 banana workers country has maintained labour laws requiring were for the first time issued so-called at least 80 percent of a firm’s employees to ‘NM1’ visas, giving them full permission be Dominican. This forces migrants to work to work and access to the social security illegally and without documents, which then system. However, the process for getting leaves them vulnerable to economic, a passport in order to qualify for the visa is social and political disadvantagesciii. complicated, costly and time-consuming for many workerscvii. Employer-worker labour A study conducted in 2010 by the relations are characteristically informal Dominican Ministry of Labour concluded and based on verbal contracts. National that 66 percent of all banana workers were statistics state that 66 percent of producers Haitian, varying from 54 percent in the south do not register any of their workers with the to 77 percent in the north west. It also Ministry of Labour. Data from 2010 shows showed that 86 percent of field workers that there are substantial wage differences and 69 percent of packhouse workers were between Dominican and Haitian employees Haitian, while 61 percent of supervisors (field (see below)cviii. and packhouse) were Dominicanciv. Fairtrade has actively supported the movement to legalise Haitian migrant labour and improve How well does Fairtrade working conditions for migrantscv. deliver a living wage? the gap with living wages, as defined by Fairtrade International. Fairtrade > What needs to happen? Only very recently, and as a result of Fairtrade has taken recent steps to International’s methodology for calculating international campaigns to highlight strengthen Fairtrade Standards with regard living wages has also been agreed (in close Governments in banana producing the situation of migrant workers, have to living wages. The 2014 Hired Labour consultation with other members of the countries must take a lead on setting Dominican trade unions started to take Standard requires companies to increase ISEAL Alliancecix – the global membership and enforcing living wage levels in the an interest in organising Haitian banana real wages annually to continuously close association for sustainability standards, banana industry. Banana companies and Fairtrade International is working and retailers must support these efforts towards integrating living wage criteria into in all origins and encourage a race to the calculations of costs of sustainable the top. production and into standards for Fairtrade Minimum Prices. Fairtrade should monitor the Daily wage comparison for national and migrant workers effectiveness of the new hired labour Source: Ministry of Labour of Dominican Republic, ‘Inmigrantes Haitianos y Merca Laboral’, 2010 The strengthening of standards is a standard closely, ensuring continual response to concern on the part of improvements to standards and Fairtrade that progress against living minimum price setting to ensure that Job Dominican wage Haitian wage wage benchmarks was too slow for some the true costs of sustainable production (Dominican peso) (Dominican peso) Fairtrade workers, including those on are met as costs change over time, banana plantations. Field/pack house supervisor 375.20 235.90 including the full integration of a living wage for workers. Packhouse worker 311.20 243.70 The likely shortfall in the banana sector Main field workers tasks 227.80 229.30 against the living wage can be seen from Other field worker tasks 272.00 198.00 the fact that most Fairtrade plantations also Average 294.00 228.30 use the Fairtrade Premium for economic support, such as the costs associated with housing, healthcare and education. These payments represented 59 percent of Fairtrade premium use in hired labour banana producers in 2011, or €2.48 million at an average of €500 per worker.

62 Britain’s Bruising Banana Wars 7/ Achieving a sustainable banana industry 63 Since 2000 more than a dozen conflicts 7.5 Workers’ rights and cases of labour rights abuse were Fairtrade and freedom The biggest problem for banana to unionise taken to the ILO Committee on Freedom of of association producers is the lack of productivity. To Association and publicised in Europe and For decades labour rights conflicts in the US. The publicity around these cases On Fairtrade plantations the requirement for address this critical issue they need to plantations and criticisms of employers helped to increase consumer awareness workers to be organised and represented and/or governments for actively repressing of the ethical issues related to banana in wage negotiations and decision-making strengthen their technical capacities and or discouraging union activities have been production and tradecxv. on the Fairtrade Premium has helped their organisations. But if prices received common in the banana sector. Allegations improve labour practices and reduced the have included dismissal or harassment As a result of pressure from Latin American marginalisation of groups such as migrant by producers continue to be insufficient of union members (actual or threatened), trade unions and civil society groups in and casual workers and women. administrative and legal hurdles to Europe and North America some successful there is no recourse to invest and unionisation and bargaining, and even the initiatives to promote workers’ organisation > What needs to happen? producers cannot secure a bank loan. repression of union members or strikerscx. have managed to emerge since the 1990s. Lack of workers’ resources and low wages A notable example is the Framework Governments in producing countries An Ecuadorian technical support officer also caused low unionisation rates. As a Agreement signed in 2001 between and banana companies must always interviewed for this study result, membership fees have had to be Chiquita, the international agricultural recognise and support the important kept very low to be affordable to workers, and food workers union, the International role of independent trade unions as thereby restraining unions’ capacities Union of Food workers (IUF) and COLSIBA the best mechanism for ensuring that and resourcescxii. (alliance of Latin American banana fair prices to producers feed through workers unions)cxvi. to living wages to workers and the An example is Ecuador’s banana industry, business benefits arising from a mature Sustainability challenges requiring where only one percent of the country’s Again, Colombia is a notable exception. The system of industrial relations. 7.6 Taking full account investment beyond the scope of costs 7.7 A new approach to pricing banana workers are unionisedcxiii. In 2002 strong independent trade union Sintrainagro of externalities of production calculations key barriers to unionisation were described is rooted in the deep social connections None of the improvements listed above can by Human Rights Watch, in a report that many workers had established during Many other important factors relating to be achieved without a new approach to which alleged opposition by employers, Colombia’s internal conflict between the the erosion of social and environmental pricing and price regulations. The current precarious work and weak legal protection government and insurgent groups. The main capital by banana production should also approach to competition regulation in for workers engaging in union activitiescxiv. banana producing regions in the country be taken into account in evaluating costs of Europe and the UK is based on a theoretical Workers earning Job losses in Health impacts In 2008 the Correa government banned are ones that were heavily affected by production on a genuinely sustainable basis. less than a living the banana related to model of a perfectly free market, with a large labour sub-contracting in large companies, fighting, and the development of the banana wage sector agrochemicals number of buyers and sellers with equal and as a result more than half of Ecuador’s producing industry in the 1990s provided These include the need to invest in power and the ability of producers to quickly banana workers have become permanent much-needed employment opportunities for preventing long-term environmental damage enter or exit the market in response to employees since then. former insurgents and their families. to water, biodiversity and soil, to adapt to price movements. In the real world in which climate change, mitigate against job losses bananas are bought and sold, the reality is in the banana sector, and to speed up very different. Co2 emissions Water Soil degradation progress towards living wages. and climate pollution and change effects abstraction > What needs to happen? The elements illustrated below apply in different exporting countries in varying Change of this kind requires strong degrees, and their individual impact is leadership. The UK Government should the subject of much discussion among grasp the opportunity to develop a more banana industry stakeholders. However, Materials and Loss of appropriate model of market regulation their existence at some level is not watse not biodiversity for the 21st century that balances generally disputed. recycled the needs of consumers, producers, businesses and the environment and While it is difficult to quantify them, it is > What needs to happen? use its influence in the European Union clear that the prices paid by UK retailers and World Trade Organization and importers do not allow an adequate The banana industry must recognise to promote its wider take-up. margin for banana producers to invest in the increasing indirect costs associated addressing these important ethical and with banana production on the social sustainability issues. and environmental capital of producing countries and local communities and ensure that these are addressed through more sustainable production and trading arrangements.

Where necessary, banana prices must include the costs of repairing environmental and social damage and investing in improved sustainability.

64 Britain’s Bruising Banana Wars 7/ Achieving a sustainable banana industry 65 Moreover, the problems have been vulnerable banana farmers and workers. It 8/ CONCLUSIONS AND RECOMMENDATIONS recognised for a long time, and the time for is for this reason that the government must change in the way the industry operates is review its own role and act to bring about long overdue. a fairer balance of power between retailers Banana farmers and workers deserve and producers. If government is serious The Fairtrade Foundation wants to see all about sourcing our food sustainably and a better deal. Everyone consulted for banana producers receive the true cost treating all in the supply chain fairly it will of sustainable production. This would need to show leadership. enable small farmers and their communities this report, including retailers and to thrive and plantations to offer their Our first recommendations are therefore employees decent working conditions addressed to market regulators in the UK banana traders, agreed that the banana and living wages. A major globally-traded and internationally: product like bananas should provide opportunities for people to work their way industry faces serious sustainability towards a better future instead of trapping BIS and UK market regulators them in poverty. Bananas also need to be and ethical challenges. produced in a way that respects the limits of • The Department for Business, Innovation the environment and uses natural resources and Skills (BIS) should show leadership more carefully. by co-ordinating government action to investigate retailer pricing on bananas To make this happen there needs to be and evaluate its impact on the long-term enough value in the supply chain to pay interests of banana producers and UK for improvements as well as meeting daily consumers. The government must also production costs and providing a fair income commit to act on the findings. for farmers and workers. But excessive price competition is a major structural constraint • BIS should seek an amendment to the to this. The progressive stripping out of Groceries Supply Code of Practice to value from the supply chain makes attempts cover overseas producers that supply to address sustainability and fair pricing major UK retailers through a third party unaffordable. Whatever the aspirations for change, the ability to act is low. • The Office of Fair Trading/ Competition and Markets Authority should launch a The problem is reinforced by a skewed market study into the banana industry. approach to market regulation that places This should look at how short term low prices as its overwhelming priority. This efficiency gains from low pricing affects is simply not appropriate for a market like producers’ ability to produce, innovate bananas in which 80 percent of the trade and achieve sustainability in the medium is undertaken by a handful of retailers that to long term and the effect of this on are closely following each other’s prices in future pricing and UK consumers. order to appear competitive. The current regulatory framework assumes that the market will correct unsustainably low The Department for Food, prices as well as artificially high ones, but Environment and Rural this is evidently not working. The rights of Affairs (DEFRA) producers to receive truly sustainable prices and the rights of consumers to purchase ethically, sustainably sourced produce are • The Department for Food, Environment losing out to the pressure for the lowest and Rural Affairs (DEFRA) should work possible prices, regardless of the true cost. with BIS to investigate the effects of downward pressure in value chains on the This report has identified a number of sustainability of UK food and to promote improvements to the ways that bananas the need for transparency by retailers and are produced and traded that would traders on value at every stage of their help achieve greater sustainability and supply chains. fairness, but none of these can be achieved without also adopting a new approach to • DEFRA should disaggregate statistics on pricing and price regulations. Of course, Fairtrade and Organic from total trade in competition law and regulation needs to bananas and encourage similar action at protect consumers, but it appears to be an EU level by Eurostat. undermining sustainability and fairness for

66 Britain’s Bruising Banana Wars 8/ Conclusions and recommendations 67 • Decent work and living wages The Department for The European Union (EU) Business and for workers The Food and Agriculture the UK public International Development exporting countries – The banana industry must ensure that Organization of the United (DFID) UK action also needs to be coherent with plantations minimise the use of temporary Nations (FAO) • Lastly but by no means least, the action at the European Union (EU) level in We also urge concerted action by the contracts and ensure all workers receive UK public has a crucial role to play. order to be effective. The main European banana industry and its stakeholders a full entitlement to bonuses and non- Over 35 percent of the bananas bought • The Department for International Commission (EC) body responsible for (retailers, banana companies and wage payments such as healthcare and • The FAO should support the processes in the UK are now Fairtrade, and this is in Development (DFID) should ensure that supermarket competition is the Directorate governments in producing countries) to social security provisions enjoyed by of research and data collection that will large part due to consumer pressure for the UK’s positive impact on poverty General for Competition (DG COMP). The make bananas fair. The large retailers and permanent workers enable sustainable costs of production ethical sourcing. The efforts of consumers among banana farmers and workers is Directorate General for Trade (DG Trade) has traders must use their dominant position – Governments in banana producing and living wages to be assessed through and campaigners in buying and strengthened by supporting initiatives responsibility for EU trade policy in and out in banana supply chains responsibly and countries must take a lead on setting and a commonly-accepted methodology and promoting Fairtrade over many years has that incentivise living wages and payment of the EUcxvii. commit to paying a fair price to farmers enforcing living wage levels in the banana transparent and independent processes. demonstrated more clearly than any policy of cost of sustainable production in and workers. This includes: industry. Banana companies and retailers There is a critical need for this in order report that the public wants to see fairness agricultural supply chains • The EU should investigate the retail must support these efforts in all countries to make progress on living wage issues and sustainability for banana farmers and pricing tactics on bananas of retailers • Paying the cost of sustainable and encourage a race to the top and to ensure the main social and workers and is willing to pay for this at the • DFID should engage with, promote, and across Europe, including as part of the production – Governments in producing countries environmental externalities are integrated supermarket checkout support international processes such current DG COMP study of modern retail – Retailers and banana traders should and banana companies must recognise into costs of production. The FAO seems as the World Banana Forum, the Ethical on choice and innovation in the EU food actively support measures aimed at the important role of independent trade to be best placed to do this. Publishing • The voices of consumers and Trading Initiative (ETI), and similar initiatives sector, and evaluate the impact of low meeting the true costs of sustainable unions as the best mechanism for the full costs of banana production on campaigners are just as vital today retail prices on the long-term interests production and delivering living wages for ensuring that fair prices to producers feed a regular basis would provide significant in keeping up the pressure for a fairer • DFID should encourage the work of trade of banana producers and European banana workers, and they should agree through as living wages to workers, as leverage to stop the current ‘race to banana trade and convincing government unions and support collective bargaining consumers. The EU must also commit to clear timetables for the implementation of well as the business benefits arising from the bottom’. and the banana industry to act. as part of multi-stakeholder processes to act on the findings these. This must be verified by external a mature system of industrial relations. By opting for ethically sourced bananas establish and support payment of cost of audit processes to ensure delivery in – Governments should also take and participating in campaigns such as sustainable production and living wages in • The EU should show policy coherence by practice and correction of any non- responsibility for ensuring that a national Civil society Make Bananas Fair the public can add its the banana industry. taking public policy considerations into compliance. minimum wage is set with unions and voice to the calls for more fairness and account when applying competition law, – Retailers should invest in educating their employers to ensure that it is as close The role of national and international civil sustainability in the banana industry. in line with multiple EU court judgements, customers about the true cost and value of as possible to a living wage. society, especially trades unions, is crucial in for example by stating the relevance of sustainably and ethically-sourced bananas. delivering change on fair prices at national Articles 11 and 208 of the Treaty of the Competition is important, but advantage • Long-term sustainability and international levels. Functioning of the European Union to should come from quality, efficiency and – The banana industry must recognise competition policy service offered by retailers, not from the increasing indirect costs associated • Standards and certification bodies, the ability to artificially subsidise certain with banana production on the social including Fairtrade, need to continue • The EU should consider adopting an products. and environmental capital of producing raising the ‘ethical bar’ to drive ombudsman similar to the UK Groceries – Retailers should ‘publish what they pay’ countries and local communities and improvements that enable banana Code Adjudicator to regulate buyer power to banana farmers and workers to ensure ensure that these are addressed through farmers and workers to build stable, in the retail industry, starting with bananas. transparency more sustainable production and trading sustainable livelihoods arrangements. Where necessary banana • Ensuring a place for small farmers in prices must include the costs of repairing • Fairtrade should ensure continual the banana industry environmental and social damage and improvements to standards and the – The banana industry must recognise the investing in improved sustainability. minimum price setting to ensure that role played by small farmers in poverty – Retailers and banana traders should the true costs of sustainable production reduction and contributing to local food actively support initiatives such as the are met as costs change over time, security. It is important that farming World Banana Forum, Fairtrade and the including the full integration of a living communities thrive and are places where Ethical Trading Initiative as ways to work wage for workers young people want to live, work and together towards greater sustainability bring up future generations. These goals and fairness in the banana industry. • Civil society actors should continue to are more likely to be achieved when – Supermarket buyers should be campaign for industry-wide action so small famers work through democratic incentivised on the basis of whether they that farmers and workers outside certified organisations such as co-operatives. deliver sustainability in their sourcing producers also see improvements to These organisations also need better of bananas in addition to their their livelihoods. support and investment. commercial targets. – Retailers should ensure a fair proportion of their bananas are sourced from organised smallholders and support the efforts of small farmers to increase productivity and quality through better prices and by providing additional investment funds such as those provided by the Fairtrade Premium

68 Britain’s Bruising Banana Wars 8/ Conclusions and recommendations 69 outcome is a synoptic view which allows us 9.1 Appendix 1 – to decompose total value chain earnings 9/ Appendices Methodological note into gains achieved by each party in the chain. The analysis then looks at supply and Terms of reference demand, production costs at all stages, The objective of the research was to bring price formation, and incomes and margins together different strands of evidence along the chain. In doing so it addresses the and analysis to provide an in-depth nature and determinants of competitiveness. understanding of retail price trends of It also analyses their dynamics and evolution bananas in the UK and the impact of these over time. on farmers and workers. As a result the research questions of this study have been: The Global Value Chain analysis conducted in this study follows the methodological • To what extent have the price wars among guidelines developed by: major supermarkets impacted on the • Duke University: ‘Commodity Chains sustainability of banana producers? Framework for Analyzing Global Industries’ • What are the main solutions for improving (Gereffi, 1999) sustainability in the banana sector? • The International Development Research • How can Fairtrade contribute to this Centre (IRDC): ‘A handbook for Value objective? Chain Research’ (Kaplinsky and Morris, 2002) Theoretical approach • The Center on Globalization Governance In order to address the above challenges & Competitiveness: ‘Global Value and fulfil the objective of the study the Chain Analysis: A Primer’ (Gereffi and theoretical framework employed is based Fernandez-Stark, 2011). on the global value chain (GVC) model developed by Gereffi et al (2005), A second stage of Impact Evaluation Gibbon and Ponte (2005), Kaplinsky analysing both social and environmental and Morris (2001). impacts was added to the Global Value Chain analysis in order to investigate and The concept of global value chains derived assess the end consequences on farmers from the world systems theory developed and workers and the communities they by Immanuel Wallerstein in the 1970s was live in. originally defined as ‘a network of labour and production processes whose end result To achieve these different analyses – is a finished commodity’. value chains and impacts – the study drew as much as possible on existing The concept was later consolidated and literature and research so as to incorporate modelled through four dimensions: a wide array of reliable evidence, avoid a. The input-output structure of the chain duplications, and focus on additional b. The territories covered (geographical research where data is lacking. Overall, coverage) 127 reports have been compiled, analysed c. The governance structure, i.e. barriers to and consolidated for the study through an entry, chain co-ordination and distinction extensive systematic review. between producer-driven and buyer- driven governance structures The reports reviewed originate from d. The institutional framework surrounding international organisations, governments, the chain, delineating the conditions public and independent research centres, under which key or ‘lead’ agents peer-reviewed journals, universities, incorporate subordinate agents through Non-Governmental Organisations, trade their control of market access and unions, consumer groups and the multi- information (both technological and stakeholder World Banana Forum, which market information). is facilitated by the FAO.

Global Value Chains enable us to analyse The systematic review performed is the creation and distribution of value from consistent with the description given by the production of the raw material to delivery Petrosino et al. (cited in van der Knaap et to the final user and the end of life of the al., 2008: 49): ‘a rigorous and transparent product. It starts with mapping the range form of literature review that involves of activities and nodes in the chain. The ‘identifying, synthesising and assessing

70 Britain’s Bruising Banana Wars 9/ Appendices 71 all available evidence, quantitative and/or Among UK retailers semi-structured A notional overall retail value of bananas has Costs of production In order to make a simple presentation of Externalities qualitative, in order to generate a robust, interviews were undertaken with Morrisons, been calculated by multiplying the volume There are several possible sources the general relationship between banana There has been insufficient time to quantify empirically derived answer to a focused Asda, Tesco, Waitrose, Sainsbury’s, Marks imported on an annual basis by the average for estimating the cost of sustainable export prices and costs of production it was the social and environmental externalities research question’.’ & Spencer, and The Co-operative Food. retail price identified through ONS data. production of bananas. The government decided to compare the the price available that affect banana production, although We interviewed senior managers who By deducting the value of imports from the of Ecuador calculates a figure in order to producers for 2012 (derived as explained these issues seem to be widely The methodological framework used for the have specific responsibility for bananas notional retail value the amount of value- to determine the minimum export price, above) with the new Fairtrade Minimum recognised as factors that increase costs systematic review is based on the guidelines or a more general remit on sustainable added in the UK (which covers import duties which is an important benchmark for world Prices due to take effect from January of sustainable production. set out by the British Overseas Development procurement practices. These retailers and charges, inland transport, ripening and trade as Ecuador is the largest exporter of 2014, but based on estimates of costs of Institute (ODI) in its Briefing Paper ‘Making account for 90 percent of sales in the retailing) has been derived. bananas and accounts for three times the production for 2012. Limitations systematic reviews work for international UK retail grocery market. volume of Colombia (its closest competitor). The main limitations of the study are related development research’ (published in Shipping costs and export value However, this is based on large plantations Non-standard products and pricing to the availability and reliability of price and January 2012). Information on retail prices and import costs An estimate has then been made for operating under optimum conditions and It was not always possible to isolate cost data along the chain. Companies To overcome these limitations this study the cost of shipping and the trends in cannot be easily applied more widely. volumes and values for Fairtrade, organic, are cautious of sharing information that This systematic review has been has first tracked average UK retail prices for these costs over the past 10 years based pre-packed and loose bananas, because is commercially sensitive, even for use in complemented with a number of interviews bananas using information collected by the on informal discussions with banana Wage rates are also published by national official statistics do not track these at import aggregated analysis. It was not possible conducted in English and Spanish with UK Office for National Statistics (ONS) and companies and reference to the CIRAD sources (Augura in Colombia, the Ministry and export level. to discuss their policies on buying and key stakeholders in the banana trade and stored by Timetric. Bananas are one of the study. It has been assumed that deducting of Agriculture in Ecuador and the Ministry retail prices for reasons of commercial industry including: components of the Consumer Price Index shipping costs from the average import of Labour in the Dominican Republic). Where it has been useful and practical to confidentiality. This implies that the data in • Banana farmers’ representatives (CPI) and the Retail Price Index (RPI), both value indicates the amount that is available This study has also referenced the work isolate Fairtrade volumes and value this this report is, in our view, the best estimate • Trade Union representatives calculated weekly by the ONS. Prices are to producers in countries of origin. done in 2012 by the Montpellier-based has been done with the help of staff at of cost and price information in key banana • Technical staff supporting farmers and collected weekly for a typical selection CIRAD on the evolution of production and the Fairtrade Foundation and Fairtrade value chains. workers on the ground of products which includes bananas – Inflation transport costs of bananas up to import International (FLO). The trade audit systems • Fairtrade Labelling Organisation field referred to as the ‘basket of goods’ – Where values have been adjusted for stage since 2000cxviii. Unfortunately the used to verify the integrity of products A second limitation was the availability of representatives and banana experts using a representative sample of about inflation the rates used have been based CIRAD Cost Index used for part of the carrying the FAIRTRADE Mark were used accurate data from the customs’ databases • Banana exporters 200 shops and other outlets. on the CPI for the appropriate countries analysis is not adjusted for inflation. for the years 2009 to 2012. of banana-exporting countries on the • Banana importers sourced from: volumes and values of banana sales by • Banana ripeners Retail prices of a kilo of loose bananas • Eurostat for the UK, France, Germany, The cost of sustainable production is also Prior to this information was collected on volume and value. This is because export • Retailers in other consumer countries have been Italy, the European Union as a whole and assessed by Fairtrade International as part a different basis, and this has been used country records are based on the first • Academics and researchers working sourced from the International Research the Eurozone of regular reviews of its banana standards to estimate figures for previous years. port of destination of bananas, whereas on the banana trade, value chains Centre on Agriculture for Development • The U.S. Bureau of Economic Analysis and revision of the Fairtrade Minimum Price. Figures on organic bananas were estimated Eurostat identifies re-exports among and Fairtrade. (CIRAD) which publishes monthly statistics • The Economic Commission for Latin on the basis of global averages for each European countries. A further complication of retail prices of bananas in its ODEADOM America and the Caribbean (ECLAC / Although there was a review of the Fairtrade exporting country. is that banana companies sometimes In total, 25 semi-structured interviews report each year. CEPAL) for Ecuador, Colombia, Costa Minimum Price in 2012 this was based on use subsidiaries in third countries in the were conducted to collect complementary Rica and the Dominican Republic an uprating for inflation of costs obtained Pre-packing of bananas has proved very management of exports. data from the field, verify assumptions and Eurostat figures have been used to identify • The International Monetary Fund (IMF) in 2009. The Fairtrade Minimum Prices difficult to track, and the balance between analyse tendencies. the volume and value of UK banana imports for Cameroon. determined through the 2012 review were bananas imported as loose and packed in by country of origin. These figures have announced in November 2013 and were the UK as opposed to bananas packed at been used to derive an average import value due to take effect from 1 January 2014. source varies from time-to-time and with per metric tonne. different origins.

72 Britain’s Bruising Banana Wars 9/ Appendices 73 9.2 Appendix 2 – Description of banana 9.3 append ix 3 – Summary of production and distribution Fairtrade impact studies

The following chart illustrates the assertion made in Section The following is our summary of the findings and limitations of 3.2 that bananas are still grown in much the same way as Fairtrade drawn from recent field-based impact studies analysing they always have been with labour intensive processes at the benefits of Fairtrade and areas for improvement referred to in all stages of production, so even when plants generate 1. Banana production takes Section 6.3. This analysis draws mainly from a study by the IDS higher yields the labour required for harvesting and approximately nine months. It (Smith: 2010). packing remains fairly constant. starts with the preparation of the soil including the clearing of land, drainage installation and fertiliser application. Benefits Limits Then planting and field work, such as weeding, pest and disease control The Fairtrade Minimum Price provides a safety net that offers a more The Fairtrade Minimum Price does not always cover all production costs. and irrigation, take place. Bananas stable income for small farmers and helps improve food security and The full extent of family labour and the external costs of ensuring long- are harvested while still green. protect against vulnerability to extreme poverty. term sustainable production are rarely covered. The costs of meeting Fairtrade standards (including both compliance and certification) are also not fully covered by the Fairtrade Minimum Price, especially when only a small proportion of total sales are made under Fairtrade terms.

Less intensive agricultural practices on small farms require more labour Farming is still not a sufficiently attractive employment option to attract per hectare then industrialised plantations and thus sustain or increase young people, and most Small Producer Organisations face the 2. The harvested bunches employment in rural communities. challenge of generational renewalcxix. are transported to a packing shed where they are divided into In the context of increasing industrialised monoculture in most banana smaller market-friendly bunches, exporting countries, Fairtrade has an indirect impact on natural resource inspected, sorted, washed, treated, management by supporting smaller producers that practice less intensive labelled and boxed for export. Bananas that do not meet the quality standards farming methods. Fairtrade Standards encourage the use of organic 3. Some bananas are usually sold locally at a much farming techniques where possible. 39 percent of Fairtrade production are pre-packed into bags lower price or used for was certified organic in 2010-11, an increase of 54 percent on the according to the specifications livestock feed. previous yearcxx. Impact has been greatest in the Windward Islands, of individual retailers. Pre-packing is where although full organic production is not yet practical Fairtrade had used to differentiate bananas such as resulted in increased wildlife, reduced soil erosion and generally cleaner Fairtrade organic or small bananas from and healthier local environments. the bulk supply of loose bananas. It can be an opportunity for the grower to add value, but it also offers The Fairtrade Premium provides resources for building the capacity of Ideally, farmers would earn enough through the price of their bananas advantages in controlling quality Small Producer Organisations. 67 percent of the premium they received to fund investment in higher future yields. But this is not the case and and reducing wastage. in 2010/11 – €6.6 million – was spent on business or organisational so available resources depend on the level of Fairtrade Premium in development, production and processingcxxi. A recent study in Colombia each organisation. In fact, many small farmers need loans or additional has shown that the yields of small farmers belonging to Fairtrade certified payments from their organisations to cover their living costs. These co-operatives were 10-15 percent higher than non-Fairtrade farmscxxii. funds are taken from the Fairtrade Premium. On average 9 percent 4. Bananas are then transported by truck to of the funds received by Small Producer Organisations – €892,000 – cxxiii ports, placed in sheds, and was spent in this way in 2010/11 . In some organisations this packed in refrigerated ships or proportion is significantly higher. refrigerated containers. Bananas take between six to 12 days to get to Fairtrade employment standards require workers on plantations to be Fairtrade Standards on wages reference three benchmarks – the legal the UK/Europe. They are shipped at employed on permanent contracts. This provides stability and also minimum wage, average wages for the sector or local area and rates a controlled temperature of 13.3°C access to social security and healthcare benefits (where available) agreed through a Collective Bargaining Agreement with an independent in order to increase their shelf- Permanent workers are better able to secure legal minimum wages trade union. They would require workers to receive whichever is the life. Humidity and ventilation and are more likely to achieve industry average wage levels (which highest. The new Fairtrade Hired Labour Standard introduced in are carefully monitored to often include bonuses). In a few cases, some of the benefits received January 2014 strengthens requirements for employers to move wages maintain quality. by workers on Fairtrade plantations have spilled over to other progressively towards living wage benchmarks. plantations locally. 5. When the bananas arrive at their The requirement for workers to be organised and represented in wage The development of representative structures for Fairtrade can create destination port they are first negotiations and decision-making on the Fairtrade Premium has helped conflicts with trade unions and may be used by employers in countries trucked to warehouses where 16 Fairtrade Standards for Hired Labour Organisations improve labour practices and reduced the marginalisation of groups such with a record of poor industrial relations as alternatives to trade union they can be kept in cool conditions specifically respect the role of independent trade as migrant and casual workers and women. representation16. This can undermine the role of unions in bargaining and then ripened – using ethylene – unions and prohibit employers favouring one channel wages and benefits and enforcing application of agreements with legal when they are needed for delivery to of worker representation over another but there have backing. Fairtrade is also struggling to take into account the aspirations retail stores. Bananas may also be been challenges in implementing this. A revised and of migrant workers, in particular because the Fairtrade Premium is put into bags at this stage. They are strengthened standard was introduced in January supposed to be invested in local communities, yet migrant workers then delivered to retailers’ regional 2014. rarely live with their families. distribution centres before final delivery to individual 17 The Joint Body, which includes representatives stores. of workers and management, is responsible for the On plantations the Fairtrade Premium has financed investment with wider Although the Fairtrade Standards prohibit the use of Fairtrade Premium management of the Fairtrade Premium in accordance community benefits. 18 percent of premium funds – €760,000 – was as a substitute for the legal obligations of employers to provide facilities with Fairtrade standards. There must be a majority of invested in education in 2010/11 and a further €340,000 in health and for workers, especially in health and housing, these vary by country and worker representatives. community facilities in 2010/11cxxiv. region and can be difficult to verify. There are examples of Joint Bodies17 using the Fairtrade Premium to leverage additional investment from employers as well as informal reports of situations where the Fairtrade Premium has displaced social investment that would normally be made by an employer.

74 Britain’s Bruising Banana Wars 9/ Appendices 75 i Kantar Fresh Produce Journal, December 2013 tribution of Value, Second Conference of the World y5102e00.HTM.: ‘..land yield in these large com- gives £606 million for banana sales through major Banana Forum, FAO, February 2012 mercial plantations can be as much as 6 times supermarkets. Supplementary analysis by the higher than that obtained in small scale production 10/ References and other sources xx author comparing average retail price and total Index Mundi Commodity Price Indices: http:// (5400 boxes per hectare compared to 900 import volume is that the total figure is in excess of www.indexmundi.com/commodities/?commodi- in small scale producers of the Caribbean)’ £700 million when independent grocers’ sales are ty=petroleum-price-index&months=180. Crude Oil also included. (petroleum), Price index, 2005 = 100, simple aver- xxxvii Pena Marin, Yadira. World Banana Forum, age of three spot prices; Dated Brent, West Texas Analisis de la cadena de valor de banano en ii The Grocer, Asda’s banana war costs rivals Intermediate, and the Dubai Fateh. (November Colombia-Estados Unidos y Colombia-Reino millions, 3 October 2009, http://www.thegrocer. 2002 = 46.49; November 2012 = 190.93). Unido, August 2012 co.uk/fmcg/asdas-banana-war-costs-rivals-millions/203895.article xxi Banana Link, Banana Trade News Bulletin 50, xxxviii UN Food and Agriculture Organization figures: June 2012, http://us2.campaign-archive1com/?u=- http://www.fao.org/economic/est/est-commodities/ iii Ibid e9cdc4f4e0d84223370731fad&id=f8cdcf1b- bananas/banana-exports/en/ 1f&e=[UNIQID] iv International Labour Organization, Tripartite Meet- xxxix UN Food and Agriculture Organization, ing to Examine the Impact of Global Food Chains xxii Instituto Interamericano de Cooperacion para la Commodity markets monitoring and on Employment, 2007 Agricultura (IICA), Estudio de la cadena alimentaria outlook, 2013 de banano en la Republica Dominicana, 2007 v Smith, Sally. Fairtrade Bananas: A Global Assess- xl UN Food and Agriculture Organization figures: ment of Impact for the Institute of Development xxiii Monitoring the Scope and Benefits of Fair- http://www.fao.org/economic/est/est-commodities/ Studies, 2010, http://www.fairtrade.org.uk/in- trade, Fourth Edition, 2012, http://www.fairtrade. bananas/banana-imports/en/ cludes/documents/cm_docs/2011/F/Fairtrade%20 net/fileadmin/user_upload/content/2009/re- in%20the%20Banana%20Sector_IDS%20Final%20 sources/2012-Monitoring_report_web.pdf xli Ibid. Report%20December%202011.pdf xxiv Based from the census carried out by the Minis- xlii FAO Banana Trade & Market website accessed in vi Office of Fair Trading, The OFT’s reasons for terio de Agricultura (Ministry of Agriculture) Ecuador, October 2013 making a reference to the Competition Commis- 2009, http://www.ecuadorencifras.com/sistagroal- http://www.fao.org/economic/est/est-commodities/ sion, May 2006, http://www.oft.gov.uk/shared_oft/ im/pdf/Banano.pdf bananas/banana-exports/en/ reports/comp_policy/oft845.pdf xxv INCAE, Analisis de la estructura salarial en la xliii Robinson, Pamela K, Do Voluntary Labour Initia- vii Centre for Economics & Business Research for industria bananer en Ecuador, February 2012 tives make a Difference for the Conditions of Work- Kellogg’s, ‘Hard to Swallow: The Facts about Food ers in Global Supply Chains? Journal of Industrial Poverty’, March 2013, http://pressoffice.kelloggs. xxvi Calculation by BASIC, comparing Fairtrade Relations, November 2010 vol. 52 no. 5 561-573 co.uk/index.php?s=20295&item=122399 banana volumes sold in the UK (data from the Fairtrade Foundation) with total banana volumes xliv Although very significant import tariff viii Balch, Oliver, Banana Pricing: the unsustainable imported from Colombia into the UK recorded by differentials remained at the EU border, the quota nature of the UK’s favourite fruit, October 2013, the Eurostat for the same year. and licensing system introduced in July 1993 was Guardian, http://www.theguardian.com/sustaina- scrapped from 1st January 2006. The tariff that ble-business/banana-pricing-unsustainable-nature-uk xxvii UN Food and Agriculture Organization, importers of Latin American bananas have to pay is The world banana economy 1985-2002, Rome, scheduled to gradually fall to 75 Euros/tonne x Powering Up Smallholder Farmers, Fairtrade 2003, http://www.fao.org/docrep/007/y5102e/ by the end of the decade. Foundation, 2013 y5102e00.HTM xlv UN Food and Agriculture Organization, xi Powering Up Smallholder Farmers, Fairtrade xxviii Agritrade, Banana sector Executive brief, July The world banana economy 1985-2002, Rome, Foundation 2013 2011, http://agritrade.cta.int/Agriculture/Commod- 2003, http://www.fao.org/docrep/007/y5102e/ ities/Bananas/Executive-Brief-Update-2011-Ba- y5102e00.HTM xii Nielson/Tracking Data 52 weeks to 12/10/13 nana-sector xlvi Smith, Sally. Fairtrade Bananas: A Global xiii Ibid xxix UN Food and Agriculture Organization, Assessment of Impact, for the Institute of The world banana economy 1985-2002, Rome, Development Studies, 2010, http://www.fairtrade. xiv The Corporation for Rural Business Development 2003, http://www.fao.org/docrep/007/y5102e/ org.uk/includes/documents/cm_docs/2011/F/ (CODER) for Max Havelaar Netherlands, y5102e00.HTM Fairtrade%20in%20the%20Banana%20Sec- An Evaluation of Fairtrade Impact on Smallholders tor_IDS%20Final%20Report%20December%20 and Workers in the Banana Sector in northern xxx UN Food and Agriculture Organization figures: 2011.pdf Colombia, 2013 and Smith, Sally. Fairtrade http://www.fao.org/economic/est/est-commodities/ Bananas: A Global Assessment of Impact for the bananas/en/ xlvii Office of Fair Trading, The grocery market – The Institute of Development Studies, 2010, http:// OFT’s reasons for making a reference to the Com- www.fairtrade.org.uk/includes/documents/ xxxi Secretaría de Estado de Agricultura (SEA), Insti- petition Commission, May 2006, http://www.oft. cm_docs/2011/F/Fairtrade%20in%20the%20 tuto Interamericano de Cooperación par a la Agri- gov.uk/shared_oft/reports/comp_policy/oft845.pdf Banana%20Sector_IDS%20Final%20Report%20 cultura (IICA) y Consejo Nacional de Competitividad December%202011.pdf (CNC), Estudio de la Cadena Agroalimentaria de xlviii Banana Link, Collateral Damage: How Banano en la República Dominicana, 2007 price wars between UK supermarkets helped to xvi UK Department of Environment, Food & Rural destroy livelihoods in the banana and pineapple Affairs, Food Statistics Pocketbook, 2013, https:// xxxii Mather, C, ‘Value Chains and Tropical Products supply chains, November 2006, www.gov.uk/government/publications/food-statis- in a Changing Global Trade Regime’, ICTSD, May tics-pocketbook-2013 2008, http://ictsd.org/downloads/2008/07/ma- xlix Finch, Julia, Supermarket price wars break ther_issuepaperno13.pdf out again, the Guardian, June 2007, http://www. xvii Centre for Economics & Business Research for theguardian.com/business/2007/jun/15/supermar- Kellogg’s, ‘Hard to Swallow: The Facts about Food xxxiii Ibid: ‘The impact of hurricanes like Dean (2007) kets.tesco Poverty’, March 2013, http://pressoffice.kelloggs. requires replanting, which in turn leads to higher co.uk/index.php?s=20295&item=122399 costs. The delay in resuming production can be as l Ibid long as eight months. xviii Evans E. and Ballen, F., Banana Market, EDIS li A.C. Nielsen, The Hard Discounter Report: Publication FE901, University of Florida, Food and xxxvi UN Food and Agriculture Organization, An Overview of Aldi & Lidl, June 2007, http:// Resource Economics Department, February 2012: The world banana economy 1985-2002, Rome, pt.nielsen.com/documents/tr_0708_Caracterizaca- “this is further evidenced by the slight decline in per 2003, http://www.fao.org/docrep/007/y5102e/ odeAldieLidl.pdf capita consumption, down from 12.9 kilograms in y5102e00.HTM 2000 to 11.2 kilograms per capita in 2009” http:// lii Andrew Stevens of Research Consultancy, edis.ifas.ufl.edu/fe901 xxxv Ibid Verdict, quoted in the Daily Telegraph October 2013, http://www.telegraph.co.uk/foodan- xix Loeillet, D. The international banana market: from xxxvi UN Food and Agriculture Organization, ddrink/10412195/How-Aldi-won-the-class-war- one world to the other, Contributions to The world banana economy 1985-2002, Rome, and-became-the-fastest-growing-supermarket-in- the World Banana Forum Working Group 02: Dis- 2003, http://www.fao.org/docrep/007/y5102e/ Britain.html

76 Britain’s Bruising Banana Wars 10/ References and other sources 77 liii http://en.wikipedia.org/wiki/Aldi#Internationally lxix Centrum fur Evaluation (CEval) (Centre for Eval- http://www.fairtrade.org.uk/includes/documents/ xcii Robinson, Pamela K, Do Voluntary Labour Initia- cix The ISEAL Alliance is the global association Consolidating the previous studies they had uation), Saarland University, for Fairtrade Germany cm_docs/2011/F/Fairtrade%20in%20the%20 tives make a Difference for the Conditions of Work- for sustainability standards and members include conducted (K. Pierret, CIRAD, “Evolution des liv Department for Business Innovation and Skills, and Max Havelaar Foundation Switzerland, ‘Final Banana%20Sector_IDS%20Final%20Report%20 ers in Global Supply Chains? Journal of Industrial the Rainforest Alliance as well as Fairtrade coûts intermédiaires des filières bananières Processes for dealing with anti-competitive activity, Report – Fairtrade Impact Study’, 2011, http:// December%202011.pdf Relations, November 2010 vol. 52 no. 5 561-573 International. d’approvisionnement du marché européen: mise 2012, https://www.gov.uk/processes-for-tack- www.fairtrade-deutschland.de/fileadmin/user_up- en place d’un outil d’analyse”, November 2011) ling-anti-competitive-activity--2 load/ueber_fairtrade/fairtrade_wirkt/2012_12_12_ lxxix Ibid xciii Ibid. cx International Labour Organization, Global agrifood and complementing them with recent data from Final_Report_Fairtrade-Impact-Study.pdf chains: Employment and social issues in fresh fruit Ecuador (Ecuador to Europe value chain study for lv Competition Act 1998 and the Enterprise Act lxxx Based on the latest census carried out xciv Banana Link, Collateral Damage: How price and vegetables, 2008, http://www.ilo.org/wcmsp5/ the World banana forum – not yet published), the 2002, http://www.oft.gov.uk/about-the-oft/le- lxx Standard Operating Procedure for by the Agriculture Ministry of Ecuador, 2009 wars between UK supermarkets helped to destroy groups/public/---ed_emp/documents/publication/ CIRAD researcher calculated the breakdown of gal-powers/legal/enterprise-act/#.UujvVzdFDcs and development of Fairtrade Minimum Prices and http://www.ecuadorencifras.com/sistagroalim/pdf/ livelihoods in the banana and pineapple supply wcms_105107.pdf costs as a percentage of total costs. http://www.oft.gov.uk/about-the-oft/legal-powers/ Premium, Fairtrade International, revised Banano.pdf chains, November 2006 legal/competition-act-1998/#.UujvdzdFDcs 11 January 2013, www.fairtrade.net cxii International Labour Organization, 2008 op. cit. cxix A widely reported factor in anecdotal evidence lxxxi In Ecuador, yields range from an average 1471 xcv Robinson, Pamela K, Do Voluntary Labour and mentioned specifically in The Corporation for lvi The Consolidated Version of the Treaty on the lxxi The Corporation for Rural Business boxes per hectare per year under a conventional Initiatives make a Difference for the Conditions of cxiii International Labour Organization, 2008 op.cit Rural Business Development (CODER) for Max Functioning of the European Union, The Official Development (CODER) for Max Havelaar monocrop system to just 192 boxes per hectare Workers in Global Supply Chains? Journal of Indus- Havelaar Netherlands, An Evaluation of Fairtrade Journal of the European Union, March 30, 2010 Netherlands, An Evaluation of Fairtrade Impact under a diversified organic system. Taken from trial Relations, November 2010 vol. 52 no. 5 561- cxiv Human Rights Watch, Tainted Harvest – Child Impact on Smallholders and Workers in the Banana on Smallholders and Workers in the Banana Sector Smith, Sally. Fairtrade Bananas: A Global 573 and Ministry of Labour of Dominican Republic, Labor and Obstacles to Organizing on Ecuador’s Sector in northern Colombia, 2013. lvii Competition Act 1998 – Chapter I, section 2, the in northern Colombia, 2013 Assessment of Impact for the Institute of ‘Inmigrantes Haitianos y Mercado Laboral’, 2010 Banana Plantations, April 2002, http://www.hrw. Prohibition, http://www.legislation.gov.uk/ukp- Development Studies, 2010, http://www.fairtrade. org/reports/2002/ecuador/2002ecuador.pdf cxx Fairtrade International - Monitoring the scope ga/1998/41/section/ lxxii Ibid. The research noted that all exporters ask org.uk/includes/documents/cm_docs/2011/F/ xcvi Robinson, Pamela K, Do Voluntary Labour Initia- and benefits of Fairtrade, 4th Edition, 2012, http:// for exclusivity so that farmers cannot sell to other Fairtrade%20in%20the%20Banana%20Sec- tives make a Difference for the Conditions cxv Ethical Consumer, Ethical Shopping Guide to www.fairtrade.org.uk/includes/documents/cm_ lviii Office of Fair Trading The supermarkets code traders, and one requires producers to commit to tor_IDS%20Final%20Report%20December%20 of Workers in Global Supply Chains? Journal Bananas, May 2012; FAO, 2003 op. cit. docs/2012/M/Monitoring%20the%20scope%20 of practice – Report on the review of the operation this exclusivity permanently. This limits the possibil- 2011.pdf of Industrial Relations, November 2010 vol. 52 no. and%20benefits%20of%20Fairtrade%202011%20 of the code of practice in the undertakings given by ity for smallholders to export directly or to diversify 5 561-573 cxvi IUF / COLSIBA and Chiquita Agreement on PUBLIC%20FLO%20Dec11.pdf Tesco, Asda, Sainsbury and Safeway to the Sec- their trade relationships and the creation of a new lxxxii Smith, Sally. Fairtrade Bananas: A Global Freedom of Association, Minimum Labour retary of State for Tradeand Industry, 18 December second tier co-operative seeks to end this practice. Assessment of Impact, for the Institute of xcvii Augura – Asociacion de Bananeros de Standards and Employment in Latin American cxxi Ibid. 2001, http://www.oft.gov.uk/shared_oft/reports/ Development Studies, 2010, http://www.fairtrade. Colombia, ‘situacion del sector bananero’, Banana Operations, 2001 consumer_protection/oft697.pdf lxxiii Fairtrade International, Monitoring the scope and org.uk/includes/documents/cm_docs/2011/F/ 2013, http://www.augura.com.co/ cxxii The Corporation for Rural Business benefits of Fairtrade, Fourth Edition, 2012, http:// Fairtrade%20in%20the%20Banana%20Sec- cxvii European Commission Directorate General for Development (CODER) for Max Havelaar lix Ibid www.fairtrade.org.uk/includes/documents/cm_ tor_IDS%20Final%20Report%20December%20 xcviii Ibid Trade website, accessed January 2014, http:// Netherlands, An Evaluation of Fairtrade Impact on docs/2012/M/Monitoring%20the%20scope%20 2011.pdf ec.europa.eu/trade/ Smallholders and Workers in the Banana Sector in lx Ibid and%20benefits%20of%20Fairtrade%202011%20 xcix The Corporation for Rural Business northern Colombia, 2013. PUBLIC%20FLO%20Dec11.pdf lxxxiii International Institute for Environment and Development (CODER) for Max Havelaar cxviii Commandeur, Julia. CIRAD, Coûts intermédi- lxi British Retail Consortium, Grocery Supply Chain Development (IIED) / hiVos / Mainumby Ñakurutú Netherlands, An Evaluation of Fairtrade Impact on aires de la filière banane d’importation en Europe: cxxiii Fairtrade International - Monitoring the scope cit ‘GSCOP has operated since 2010 and to date lxxiv Fairtrade International, Aims of Fairtrade Stand- Research Centre, Small producer agency in the Smallholders and Workers in the Banana Sector in Répartition et évolution, November 2012. and benefits of Fairtrade, 4th Edition, 2012, http:// no supplier has applied for arbitration to resolve ards, http://www.fairtrade.net/aims-of-fairtrade- globalised market – Making choices in a changing northern Colombia, 2013 The following cost components were analysed www.fairtrade.org.uk/includes/documents/cm_ a dispute with their retailer’, http://www.brc. standards.html world, 2012 in this study (see table below): docs/2012/M/Monitoring%20the%20scope%20 org.uk/brc_policy_content.asp?iCat=46&iSub- c The Grocer, ‘Fears of a Banana Shortage as and%20benefits%20of%20Fairtrade%202011%20 Cat=657&spolicy= Food&sSubPolicy=Grocery+- lxxv Fairtrade International, Fairtrade Standards for lxxxiv Wegner and Zwart for Oxfam, Who Will Feed Colombian Workers Vote to Strike’, June 7 2013, PUBLIC%20FLO%20Dec11.pdf Supply+Chain Hired Labour, 2014 www.fairtrade.net/standards. the World?, April 2011, http://www.oxfam.org/ http://www.thegrocer.co.uk/fmcg/fresh/banana- html sites/www.oxfam.org/files/who-will-feed-the- shortage-fears-grow-as-colombian-workers-vote- cxxiv Ibid. lxii See discussion in Townley, C. Article 81 EC world-rr-260411-en.pdf and International Institute to-strike/344047.article and Public Policy (2009) Oxford: Hart Publishing, lxxvi Smith, Sally. Fairtrade Bananas: A Global for Environment and Development (IIED)/ hiVos/ 51 and 158 Assessment of Impact, for the Institute of Mainumby Nakurutu, Small producer agency in the ci INCAE Business School, ‘Analisis de la Development Studies, 2010, globalised market – Making choices in a changing estructura salarial en la industria bananer en Ecua- lxiii Townley, C. (2013). Is There (Still) Room for http://www.fairtrade.org.uk/includes/documents/ world, 2012 dor’, Feb 2012 Non-Economic Arguments in Article 101 TFEU cm_docs/2011/F/Fairtrade%20in%20the%20 Cost components of bananas up to the import stage Cases?. In Heide-Jorgensen, C. (Ed.), Aims and Banana%20Sector_IDS%20Final%20Report%20 lxxxv UN Food and Agriculture Organization, cii The Ecuadorian government calculates the ‘living Source: BASIC based on CIRAD (2012) Values in Competition Law. Copenhagen: Djøf Pub- December%202011.pdf In the case of Fairtrade International Labour Organization, International wage’ based on the median value of an extended lishing; Townley, C. Which Goals Count in plantations in Ecuador and the Dominican Union of Food workers, Agricultural workers and basket of basic goods and services necessary Article 101 TFEU?: public policy and its Republic, daily wages or piece rates are above their contribution to sustainable agriculture and for a household to purchase (Canasta básica Stage of Type of discontents, (2011) 9 European Competition Law national minimum wage levels but broadly in line rural development, 2007 familiar - CBF) divided by the average number of the chain costs Review 441-448 and Townley, C. Article 81 EC with industry averages. Worker income is often wage-earners in a household. It remains indicative and Public Policy (2009) Oxford: Hart Publishing; boosted by payment of legislated wage related lxxxvi Wegner and Zwart for Oxfam, Who Will Feed and non-binding. Produce Fertilizers Fertilizers and soil conditioners used in production Townley, C. ‘The Goals of Chapter I of the UK’s benefits such as annual bonuses, paid annual leave the World?, April 2011, http://www.oxfam.org/ ciii Competition Act 1998’ (2010) Yearbook of and premiums for overtime hours. sites/www.oxfam.org/files/who-will-feed-the-world- Banana Link, Banana Trade News Bulletin 50, Agrochemicals Pesticides, nematicides and treatment products used in European Law, 29, 1, 307-360. rr-260411-en.pdf June 2012, op cit. ‘Many Haitian migrant work- production and packing In the case of workers employed by small ers do not even have a birth certificate, a basic lxiv De Schutter, O., The Common Agricultural producers in Ecuador, both permanent and tempo- lxxxvii Buttel, F. H. Internalizing the Societal Costs requirement for getting a passport’, http://us2. Irrigation Irrigation costs and inputs Policy towards 2020: The role of the European Un- rary workers were generally paid higher daily rates of Agricultural Production, University of campaign-archive1 ion in supporting the realization of the right to food, than those employed by non Fairtrade plantations Wisconsin, 2003 Comments and recommendations by the United in Ecuador. Permanent workers also received social civ Ministry of Labour of Dominican Republic, Packing Packing material Cardboard boxes, polybags and pallets used in packing Nations Special Rapporteur on the Right to Food, security, which gave them access to credit and lxxxviii International Institute for Environment and Inmigrantes Haitianos y Mercado Laboral, 2010 Office of the United Nations High Commissioner for loans. Development (IIED) / hiVos / Mainumby Ñakurutú Human Rights, 17 June 2011 Research Centre, Small producer agency in cv Fairtrade Foundation Press Release, Haitian Shipping Ocean freight Chartering, insurance and fuel costs In the Dominican Republic, a study carried out the globalised market - Making choices in a Migrant Workers in the Dominican Republic; lxv Article 11, 191 and 208, Treaty on the by the small farmer organizations indicated that changing world, 2012 A Need for Change, 29 May 2012 Functioning of the European Union 42 percent of members’ workers had stayed with lxxxix cvi Cross-cutting Wages Salary costs of hired labour in field work (soil preparation, them for more than 5 years, deemed unusual in Murphy, Sophia. Concentrated Market Power Banana Link, Banana Trade News Bulletin 50, planting, weeding, harvest...) and packing lxvi Office of Fair Trading, 2010: Article 101(3) the banana sector, and this is apparently related to and Agricultural Trade, Ecofair Trade Dialogue dis- June 2012, op cit. http://us2.campaign-archive1. A discussion of narrow versus broad definition of higher wage rates and various other financial and cussion papers, August 2006, (project carried out com/?u=e9cdc4f4e0d84223370731fad&id=f8cdcf- Energy Fuel costs of farm equipment and road trucks benefits, summary note for OFT breakfast round- non financial benefits. by the Heinrich Böll Foundation in cooperation with 1b1f&e=[UNIQID]? table. MISEREOR and moderated by the lxxvii cvii Financial costs Amortization, general services, salary costs of management The Corporation for Rural Business Wuppertal Institute) Cf. Banana Link, Banana Trade News Bulletin 50, staff, harbour taxes and customs, cargo loading costs lxvii BBC News Online, Minimum alcohol pricing: Po- Development (CODER) for Max Havelaar June 2012: ‘Many Haitian migrant workers do not sition of the European Commission, 25 July 2013, Netherlands, An Evaluation of Fairtrade Impact xc Food Inc., Corporate Concentration from farm to even have a birth certificate, a basic requirement for http://www.bbc.co.uk/news/uk-scotland-scot- on Smallholders and Workers in the Banana Sector consumer the UK Food Group, 2005 getting a passport’, http://us2.campaign-archive1. land-politics-22368551 in northern Colombia, 2013 com/?u=e9cdc4f4e0d84223370731fad&id=f8cdcf- xci International Labour Organization, Tripartite 1b1f&e=[UNIQID]? lxviii All figures from Fairtrade International Annual lxxviii Smith, Sally. Fairtrade Bananas: A Global Meeting to Examine the Impact of Global Food Report for 2012-13 Assessment of Impact, for the Institute of Chains on Employment, 2007 op. cit cviii Ibid. Development Studies, 2010,

78 Britain’s Bruising Banana Wars 10/ References and other sources 79 ACKNOWLEDGMENTS

This report was written by Ian Bretman and edited by the Fairtrade Foundation, based on a source report by Alistair Smith of Bananalink and Christophe Alliot and Sylvain Ly of BASIC. We would like to thank the large number of Fairtrade Foundation staff who contributed with advice and additional material and the many people outside the Foundation who offered insight, analysis and evidence. We would particularly like to thank the banana producers and industry experts who were interviewed or consulted. Every effort has been made to ensure accuracy, and all statements are made in good faith in the interests of public debate and discussion.

80 Britain’s Bruising Banana Wars 2/ Executive Summary 81

‘When the price of bananas goes down we suffer the impact. Our Albeiro living Alfonso conditions ‘Foncho’ Cantillo go down.’

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