While there’s a price war being waged between supermarkets in Europe, Orlando Olmedo of Mexican Chanitos sees a price battle being fought in the United States as well. Over there it’s not the supermarkets, but banana companies that are competing with each other. This means that the US and Europe aren’t attractive markets to growers anymore, China is growing and prices are better.
Mexican Chanitos grows and sells bananas in Mexico, the United States and Europe. The most important markets for the company are home market Mexico and neighbouring US. Last year, Chanitos started exporting to Europe. “We mostly export to Northern Europe and Italy,” says Orlando Olmedo. “We have contracts with Chiquita, and we supply under our own label Chanitos.”
Market share
From Mexico, he sees that the price war has already crossed the ocean. “I see that the price war is already being waged in American retail. The banana market in the US is stable, the only way in which more bananas could be sold is by taking over a competitor’s market share. The most common way to do that is by lowering the price.” This pressure on prices has an effect on the entire chain. “As a result, the multinationals have to be very competitive when it comes to transport costs, and they are paying the growers less and less.”
The biggest competitive advantage of the big players in the market is the constant supply from different countries. “That means there’s less of a risk in case a specific country is hit by a disease, for instance.” Orlando sees, however, that there is room for new players that can compete on quality and price. The main reason? Access to the banana market has become easier, because logistics have become cheaper and simpler. “If the market continues to keep prices down, multinationals also have to cut costs in order to continue existing, but I do think this is possible.”
Saturated market
For Europe, Orlando sees a similar scenario: “the banana market in Europe is very well developed, that’s why a price war broke out. Growers are looking for better prices in other markets.” One of the markets that’s still growing fast and promises good prices, is China. “That’s an interesting market because of the quick growth,” Orlando says. “The market for produce from Latin America is growing, so the prices are good. I think China will have better prices than Europe in the coming years.”
In addition to all the fluctuations in the market, the global banana production is also threatened by various natural enemies. Diseases like Panama Disease and Black Sigatoka, but also hurricanes, can cause a lot of damage. “Every producing country can face hurricanes, floods and other natural disasters. If that happens, supplies are interrupted for a few months, but it’s a matter of time, months or a year, until the cultivation has been restored again in that area.”
Diseases and natural disasters offer opportunities
Black Sigatoka is above all an expensive challenge. “When you don’t control Black Sigatoka properly, your production costs increase, but the disease doesn’t bankrupt you. The Panama Disease is a big threat, because banana cultivation becomes impossible due to the disease. When a plantation is hit by Panama Disease, you can’t grow any bananas on that plantation for the next thirty to forty years.”
The Black Sigatoka is under control, and at the moment Panama Disease hasn’t affected Latin America yet. During the past months though, the disease was seen to advance further and further, with reports of Panama Disease also coming from Australia, Lebanon and Pakistan. The most disturbing thing about the occurrence in Pakistan is that researchers can’t explain how the disease entered the country. Banana plantations in Southeast Asia, Africa and the Middle East are affected by Panama Disease.
While production in the Philippines is under pressure from the banana diseases and hurricanes, Latin America profits from the situation. “Countries that can’t get the diseases under control will slow down their supplies, giving other countries the opportunity to increase production. Latin America, and Mexico in particular, is an example of this. The acreages are increasing thanks to good climatological conditions and increasing productivity. Black Sigatoka is under control here, and at the moment we don’t have Panama Disease.”
