I know I won’t be the only one who is surprised by Kantar Worldpanel’s banana sales data showing that an increase in price at Sainsbury’s encouraged shoppers to go elsewhere for the country’s most popular fruit in a 12-week period last summer.
It is one of those hoary old chestnuts of the industry that banana demand is stable enough that it would not be affected by an increase in price. The Banana Group, which played such a big role in uniting the category during its years of exponential growth, underlined this belief constantly. Its members (including every large banana player in the UK) were adamant that sales would not be affected by price.
For a long time, this argument resonated with buyers too, but the supply chain was powerless to intervene when the bottom was knocked out of banana prices by the first concerted retail price war, which chose bananas as its focal fresh produce killing field. The suppliers have never been able to exert enough pressure to return those prices to previous levels, and the banana category has become something of a stale battleground as a result.
In the same presentation Kantar illustrates the level of price deflation the banana category has seen in the UK, and that explains why the major banana brands withdrew marketing funds, personnel and theatre out of the category. An article in The Guardian last year also summed it up quite nicely, with this paragraph saying more than any other about the state the industry has been thrown into: “Walk into Tesco or Asda today and you’ll be able to buy a kilo of bananas for about 68p. Back in 2002 that same bunch would have cost £1.08 – yes, 59% more. Bananas are a glaring exception to the rule that food keeps getting more expensive. If banana price inflation had kept up with the pace of Mars bars, for instance, the fruit would cost £2.60 a kilo now.”
In our feature video BanaBay’s Mark O’Sullivan suggests there is still a place in the market for higher priced bananas, and this may well be true. But the leading supermarkets have long since stopped competing on the premium quality of their bananas – preferring to compete on either price or, in the case of Waitrose and Sainsbury’s, the Fairtrade cause.
Whether that has been of any major benefit to Fairtrade, other than increasing volumes into the UK market, is a moot point. Here’s what Sainsbury’s director Mike Coupe said when he announced the launch of the group’s marketing offensive Same Price, Different Values in 2013. The key point he made was that consumers who were understandably looking to spend less after the credit crunch nevertheless still wanted to buy into ethics and values.
Bananas were the pin-up of that Same Price, Different Values campaign, but if we are to believe the behaviour of 30,000 Kantar households to be typical, it is the price element of that promise, not values, that is dearest to today’s British consumer when they make their banana purchasing decisions. Although banana sales did not fall across the piece, Sainsbury’s own sales took a huge dive when it raised prices last summer due to the two-pronged impact of shoppers either buying less loose bananas at Sainsbury’s, or switching their allegiances elsewhere for cheaper bananas. By selling loose Fairtrade bananas at the same price as the non-Fairtrade offer of its rivals, did Sainsbury’s sub-consciously make Fairtrade less of a cause celebre and merely a ‘label’?
It would appear so to me, because a lot of people abandoned Fairtrade as soon as the price went up. Losing 335,000kg of loose sales in 12 weeks, as Sainsbury’s did, is pretty significant. Tesco and Asda were the main beneficiaries, but Waitrose, which also raised its prices in the period from a higher level previously, also took sales away from Sainsbury’s. That might suggest that demand is less reliant on price when you take the overall positioning of the chain into account – not a startling revelation perhaps, but interesting nonetheless.
Of course, this is a far from perfect test of price vs demand. We would have to see a price rise across the board to properly measure the elasticity or otherwise of demand in the circumstances. However, it is a valuable snapshot of the consumer mindset in the current climate – particularly, I’d suggest, in a commoditised category such as bananas. The fact that as soon as prices rose, so many were prepared to walk away from Sainsbury’s for one of the staple items in their basket shows they are watching like hawks.
Having been told it on so many occasions over the years, I still find it hard to believe that consumers wouldn’t pay a little more for their bananas if they were asked to. But it is consumer perception that has changed more than anyone could have foreseen, and maybe the trade has to adapt its own mantra. The Banana Group was spreading its message in less complex times. It drew on some of the finest marketing minds in the trade, but even they did not see the last decade coming.
Whatever the industry believes to be the real truth, it will clearly be a brave retailer now who chooses to increase the price of its bananas in the future.