No-one's fooling Jorge Sauma that supermarket price wars don't harm producers.
When Asda kicked off one of the most aggressive series of discounts in recent memory last August, prompting rivals to cut banana prices by more than half, retailers said they'd take the hit themselves.
That may be true, but the potential for casualties among producers is still large. "The growers suffer when there's a price war," insists Sauma, CEO of Costa Rican banana association Corbana. "When they discount, they start looking at cheaper sources such as Ecuador and the African countries. I'm always fighting with the supermarkets and I have told them they must stop the war. The weakest part of the chain is the grower and they will suffer."
News of the price war raging in the UK's supermarket aisles did not take long to reach the Central American nation, making Costa Rican growers, already labouring under costs up to 10% higher than in rival countries, feel all the more vulnerable.
The dynamics of global banana supply are changing, and the old guard of African and Caribbean producers are facing up to new threats that go beyond the problems posed by the weather. With Philippine producers expected to target the EU with cheaper fruit and old rivalries with competing Latin American countries mounting the threat of Costa Rican banana farmers being priced out of the market is considerable. The onus on Costa Rica is to innovate, and the solutions its producers have found could serve as a model for other nations.
To protect the country's enviable market share one in every four bananas unpeeled in Britain comes from Costa Rica Corbana has set itself perhaps the ultimate challenge in grocery: premiumising the humble banana. But how can Western shoppers, who are as cost-conscious as ever, be persuaded to pay more for their fruit?
Corbana has a novel answer to the conundrum; it is preparing to bid for Protected Geographical Indication (PGI) status from the EU next year, following in the footsteps of Colombian coffee, which became the first non-EU product to win PGI status under new rules in 2007. The aim is to make Costa Rica synonymous with superior welfare and environmental standards.
The country has much in its favour. An oasis of stability in a frequently troubled region, Costa Rica has the geographical advantage of direct access to the Atlantic via Puerto Limón (the world's number-one banana exporter, Ecuador, has to traverse the Panama canal) and closer proximity to Europe than number-two player The Philippines. But its production costs are among the highest in the world.
So far, farmers have managed to offset their overheads and remain competitive through higher-yielding production techniques. But as the competition ups its game and increasingly frequent instances of drought impact on production costs, Costa Rica is set to come under increasing price pressure.
The lofty overheads are down, in part, to social policies implemented under Costa Rican law. Farmers are guaranteed an annually reviewed minimum price for their bananas, currently $7.69 per box. Workers are assured a centrally set minimum wage, free schooling, healthcare and other benefits. Farmers are legally required to offer at least some of their workers housing.
It's not just in social welfare that Costa Rica believes it is ahead of the game. It has made great strides in upping recycling rates and cutting its water and herbicide use and has adopted a raft of sustainable production methods as part of the government's ambitious plan to make the whole country carbon neutral by 2021.
Of course all this does not come cheap, as Sauma explains. "We compete on price with countries that do not do the same as us. It's an unfair contest. Our big challenge is how to compete and be competitive yet retain the high salaries and efforts in environmental issues that we provide."
The question is one of raising awareness of Costa Rica's credentials in its key export markets. To this end, Corbana, which until now has only carried out limited trade-orientated marketing, is preparing for a consumer campaign starting with the PGI application and aimed at linking Costa Rica with high ethical and environmental standards in shoppers' minds. Win consumers' hearts, the thinking goes, and they'll pay more for their bananas.
"People said in the past that multinational companies like Chiquita and Del Monte would put the price to the supermarket, but now it's the other way around," says Omar Sánchez Rojas, head of statistics at Corbana. "With most farms having to support about 10% more production costs related to worker benefits, another 10% on top of the price would reflect that."
One approach to reducing costs could be to branch out into different varieties. Low genetic diversity on banana plantations currently leaves crops vulnerable to pests and disease. But there are more than 1,000 varieties and the time could be ripe to diversify. Research into other varieties could be boosted by the development of Costa Rica's first university dedicated to the study of the fruit, which Corbana is in early talks over with Victoria Léon Wong, one of the country's two female plantation owner-managers.
It's worthy of note that less than 1% of the country's bananas have Fairtrade accreditation. However, Sauma suggests its banana industry is de facto Fairtrade, thanks to the measures already in place. Clearly the pursuit of Fairtrade Foundation accreditation would be costly and the benefits would be negligible, as a Costa Rican Fairtrade banana would have no point of difference from one grown in, say, Indonesia.
"We want to make Costa Rica a brand," says Sauma, suggesting the forthcoming PGI bid, the marketing push and a government initiative encompassing Corbana, the Tourism Board and the Export Promotion Agency will cement Costa Rica's wholesome image. If successful, its approach may well be one other countries could look to imitate. "We must put the origin on the bananas and make it clear for consumers. At the moment we do all this work and don't get any differentiation. We want to create a premium banana. It's very important how the banana is produced this is our slogan."
The facts: unpeeled
- About 770 million Costa Rican bananas arrived in Britain last year, accounting for 25% of sales
- Bananas account for 2.5% of Costa Rica's GDP and, as the country's third biggest export after computer parts and integrated circuits, represent 7.1% of total export revenue
- After Ecuador and The Philippines, Costa Rica is the world's third largest banana exporter
- In 2009, Costa Rica produced 1.5 billion kilos of bananas, or 87 million boxes
- After a good harvest this year, growers are expecting a 21% uplift in banana volumes
- All the world's leading fruit companies - including Chiquita, Dole, Fyffes and Del Monte - operate in Costa Rica
Variety could be the spice of life for the banana trade
While there are hundreds of banana varieties, supermarkets almost exclusively sell the Cavendish fruit.
Growers are frustrated that a lack of genetic variety means bananas are more susceptible to pests and disease, and want shoppers to consider varieties that taste slightly different.
"Researchers are looking at new varieties for tolerance or resistance, but the problem is that the market hasn't accepted these new varieties," says Olman Quiros, who runs Corbana's biological molecular lab.
Varieties have already been developed that can fight off the two main threats to the banana, the leaf disease black sigatoka and the nematodes pest control of which accounts for a staggering 20% of the production cost of the fruit.
However, such varieties demand a higher retail price and until consumers are prepared to consider different tastes, such as a more acidic banana, the shelf price isn't likely to fall.