USA: Retailers try to keep banana prices down

By Bob Luder, thepacker.com

(Jan. 16, 12:06 p.m.) It’s a dilemma that would make even the most sane, well-meaning retailer go … well … bananas.

By all accounts, the cost of bananas to retailers is going up. Flooding in Ecuador dating back to last February, along with weather issues and a recent earthquake in Costa Rica have contributed to significant reductions in global supply. That, along with increased demand globally, has put pressure on costs.

In many instances, those rising costs would be passed along to consumers in the way of higher prices in the grocery produce aisles.

Except, we’re talking bananas here. And consumers really keep tabs on prices and care what they pay for when it comes to this favorite fruit staple.

“Among all prices visible in the produce industry, bananas are probably the most visible,” said Bill Bishop, chairman of Willard Bishop LLC, a Barrington, Ill.-based consulting firm. “And the reality of (the economy) today is that more and more individuals are focused on the prices of goods they’re buying.”

The sensitivity of the banana buyer prompted Milwaukee-based Roundy’s Supermarkets to issue a consumer alert Jan. 8 stating that costs for bananas were on the rise, but that the chain of 152 retail grocery stores under the Pick ‘n Save, Copps, Rainbow and Metro Market banners pledged to do its best to keep retail prices from continued increases.

“We’re doing the best we can,” said Vivian King, media relations director of Roundy’s. “We’ve held off raising prices as long as we can. Other retailers have gone up in the past while we’ve held firm.

“Our contract was up recently, so we entered a new contract. Our prices have gone up about five cents per pound. It’s not a big increase, but significant enough to alert our customers as to why prices went up on one of their favorite items.

“We feel we’ve remained competitive with our prices. We just want to keep our customers informed.”

Other major retail grocery chains say they have been doing all they can to hold the line on banana prices as well.

“The market has been very tight and will be very tight over the next month,” Maria Brous, director of media and community relations of Publix Super Markets Inc., Lakeland, Fla., said in an e-mail. “However, we work extremely hard with our suppliers to control cost. At this time, we are not forecasting an increase in banana pricing at Publix.”

And Susie Bell, corporate public affairs manager at Supervalu, Eden Prairie, Minn., said, also via e-mail: “We have been working since the floods in Ecuador last February to actively manage the situation so that customers at Supervalu banner stores likely will not see a price increase on bananas.”

According to consultants, there are a number of ways retailers can control pricing.

“What retailers are concerned about are consumers backing off buying bananas,” said Ed Odron, owner of Ed Odron Produce Marketing & Consulting, Stockton, Calif. “Back in the day, the thought was you couldn’t go over 49 cents per pound, or you’d lose the value. We overcame that.

“It’s a very sensitive item. Retailers have been looking hard at ways to maybe raise (profit margins) in other areas so they can hold the line on bananas. They’ve probably been doing that the last six or seven months.

“At some point, you have to bump them up. I don’t know if now is the right time to do that, however, given the state of the economy.”

Bishop added, “There could be any number of strategic interventions. One thing to look at is a way to use promotion more aggressively. For example, instead of selling bananas at, say, 89 cents and discounting to 59 cents one out of every eight weeks or so, have an 89-cent regular price and go to 69 cents for two weeks.”

It’s also quite possible the banana-consuming public has grown perhaps a bit spoiled with low pricing of their favorite fruit.

“You really haven’t seen a lot of inflation in produce,” said Dick Spezzano, president of Spezzano Consulting Services, Monrovia, Calif. “Even in some retail circles, we’ve been seeing some deflation because delivered prices have been brought down with decreased costs in shipping.

“For a long time, we’ve had very, very cheap costs for bananas. (Consumers are) sensitive to bananas because they’re such a consumed staple in America. You look at the consumption of bananas with regard to other fruits and vegetables, and it’s not even close.”

Odron added, “Bananas are still probably the cheapest piece of fruit you’ve got.”

On Jan. 13, the U.S. Department of Agriculture was reporting a price range of $11.50-$16 on bananas moving through the Miami produce terminal, up about $2 from the $10-$14 range of a year ago.