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North American banana sales holding strong with consumer move to 'basics'

by Tad Thompson | June 23, 2009
Reflecting the world economy, the global banana marketing situation is complex as it is described by Juan Alarcon, the chief executive officer of Turbana Corp. in Coral Gables, FL.

When the view of banana markets is narrowed to North America, it is a scene that does not reflect wider turbulence, he said, noting that it is the European and North American markets that have remained most steady.

"The U.S. market has been strong and usually the summertime is a period when demand is low and prices are down," Mr. Alarcon told The Produce News June 10. "This year we don't expect that, but there are some challenges on the supply side in all the countries in the tropics."

Typically banana demand drops by 10 percent in the summer. "I think this will be compensated [for] with less supply. I think this summer we will maintain reasonable prices more due to supply than demand," he said, adding, "On the other side, we have not seen a decrease in demand. Usually June is down, but demand is holding very well this June."

Typically summer season banana purchasing patterns change in part because families go on vacation.

"Now, with the [economy], there are less vacations this year than in a normal year, so maybe demand won't suffer that much," Mr. Alarcon said. Bananas still compete with domestic production of products like stone fruit and watermelon "but breakfast is still a very important part of the consumption of bananas."

Another factor favoring banana sales this summer is a consumer move "back to basics," he said.

"Bananas, we feel, are a very good value," Mr. Alarcon said. "Although the price at retail has increased in certain areas, the demand has been better. When there is a crisis people go back to basics."

He said that bananas are among the "basic" foods. "They are healthy and the cheapest item in the whole fruit department. People are also buying potatoes, onions, lettuce and carrots, but they're buying less precut salad. So people are buying more basics, which is better than buying a new crazy fruit [at] $5 each."

Starting in the second half of 2008, and continuing this year, banana prices to retailers have risen. "If their cost has gone up 10 cents, they're charging consumer 20 cents," Mr. Alarcon noted. But even at that, sales to consumers are strong. He added that Turbana wants to sell bananas to retailers at a profitable price. "If not, we have got go back to the growers" and ask for a discounted price.

Mr. Alarcon said that Latin American banana supplies have been down this year, but are not as disrupted as they were in 2008. Generally speaking, supplies are expected to increase late this summer, but that forecast may be affected by increased El Ni?o activity in the Pacific Ocean. "If there is a lot of production, there are two options: All the markets are flooded and every one [of the banana companies] will lose their shirts. Or, they can control the volume going out," Mr. Alarcon said.

He noted that banana companies have become more careful and he expects that "companies will bring volume they think is profitable. In the past we were competing to see who could lose more money and the retailers used their power saying to everyone: 'Give me your best price.'

"This losing money was made up with licenses [in Europe] or other products made a ton of money. Those other markets don't exist anymore. Now we either make money in the [banana] business or get out of the business. I think these are survival decisions."

Pete Carcione, the owner of Carcione Fresh Produce, in South San Francisco, CA, shared Mr. Alarcon's opinion that banana prices were too low for too long. He said the fruit has now reached the right price, where it can be profitable for all parties.

"There have been some problems with supply, so the market is holding up very well," he said. "We have a good healthy price. All the stores sell them all year round. The banana business is good."