UK Supermarket Mergers and the Saint Lucian Banana
Is Anyone Concerned About the Sainsbury’s – ASDA Merger and its Impact on Saint Lucia’s Banana Industry?
I have waited patiently to hear something from official sources, political parties, anyone, about the proposed merger between the second and third largest supermarkets in the United Kingdom, Sainsbury’s and Asda and its impact on our banana industry but so far, I have heard nothing.
The merger between Sainsbury’s and Asda is being done to make the new company more competitive, particularly against the number one supermarket in the UK - Tesco. UK market analysts have indicated that the £12 billion merger of Sainsbury’s and Asda will force the companies to sell at least 73 supermarkets, and this number may increase to as many as 245 stores being closed across the United Kingdom, depending on the decision by the Competition and Markets Authority. Already, Sainsbury’s has promised that it will cut the prices of its products by 10%, and there are fears in the UK that this will result in farmers and other suppliers seeing their profit margins squeezed. This development can have very serious implications for the price that the new company will be willing to pay for bananas from Saint Lucia. Bananas have often been used as a loss leader in the UK supermarkets, which means that bananas are usually sold to consumers at a price below their market value to entice customers to purchase other products on which the supermarket makes a larger profit.
For a very long time, Sainsbury’s has been the most loyal customer of Windwards bananas and has remained committed to the Windward Islands banana industry through all the difficult periods caused by hurricanes, floods, droughts, Leaf Spot and recently, Black Sigatoka disease. However, the supermarket industry in the UK has changed significantly in recent years, with the entry of the US retail giant WalMart, increased competition from the German discount supermarkets Aldi and Lidl, and the increasing popularity of online grocery shopping from Amazon, which has been aggressive in its marketing. For the financial year that just ended in March 2018, Sainsbury’s recorded an almost 20% drop in pre-tax profits. So, there is no guarantee that the commitment to Windwards bananas will endure after the merger, and if it does, there must be concern over the price that the company will offer for our bananas.
Currently, Saint Lucia is the only Windward Island that still exports bananas to the United Kingdom. The UK banana export business has disappeared in Dominica and St. Vincent and the Grenadines. However, the costs of banana production in Saint Lucia are relatively high, because of the small size of our farms, the relatively higher costs of labour, the high costs of inputs, and recently, the increasing burden of pest and disease control. The FOB price for a box of Windwards (Saint Lucia) bananas is almost US$13.80, while the comparative figures for the Dominican Republic, Colombia, Costa Rica, Cameroon and Ghana are approximately US$12, US$10.80, US$10.25, $9.20 and US$9 respectively.
Last year. banana production in Saint Lucia continued to decline, as shown in the Economic and Social Review that was tabled by the government in Parliament during the budget debate. The regional market for Saint Lucian bananas has also contracted. We have seen the banana industry move from a situation in the early 1990s when 120,000 tonnes of bananas were exported to the UK, bringing in foreign exchange of $200 million, to last year’s position of 8,898 tonnes exported to the UK, with a value of EC$ 14.6 million.
I guess with everything else going on in the country, this issue isn’t considered that important. That is a pity.