Demystifying the economy | The price of bananas… a loss leader?

Every Saturday, one of our journalists answers one of your questions on the economy, finances, markets, etc.




I walk around the warehouse store and wonder how it is possible that the sale price of bananas is so low, $1.99 for a large pack. It seems to me that this price should not even cover transport costs. As this is a very regular price, it does not appear to be a product loss leader. –Jocelyn Jeffrey

Although bananas are not immune to a price increase as was the case recently due to poor harvests, the desire of retailers to keep this product affordable and the efficiency of the production chain, involving little of exporting countries and some major food groups, largely explain why the popular fruit remains among the most accessible in the supermarket, all year round.

At least that’s the analysis made by Pascal Thériault, an agronomist and economist at McGill University. “The banana was developed with practically a single variety, the Cavendish,” he says. It is a fruit that grows easily, which is very homogeneous, which is very predictable over time. The places where it is grown – especially in Central America – have no seasons. »

He also recalls that the Dole, Chiquita and Del Monte of this world, who trade in it, have created infrastructure (roads, ports) in exporting countries to facilitate the marketing of the yellow fruit.

“To a certain extent, these large groups have influenced the internal policies of these countries. The expression “banana republic” comes from there,” illustrates Professor Pascal Thériault. Ecuador, Costa Rica and Colombia are among the main exporting countries.

It is a fruit that sells well and is easy to store. Since the peel is thick, you don’t need to wrap and overwrap it.

Pascal Thériault, agronomist and economist at McGill University

Add to that the “less than ideal” working conditions linked to its culture and you have all the ingredients to keep the price low.

A convenience product

At Mayrand, Pierre Lapointe, president and CEO, recalls that the banana has become what is called in the jargon a “convenience product”. “It’s very rare that people put it on their grocery list, they don’t need to think about it, they eat it every week. It’s a bit like milk, you know you’re going to buy it. »

Despite everything, the big boss of Mayrand – which has four stores – recalls that the price of bananas is not immune to increases. “There were very poor banana harvests. There is a 40% increase in the price of bananas currently. »

Its price went from $21 a case to $31 a case in a month, he says.

Many retailers still make the decision to offer bananas at an affordable price. “We strive to keep our prices very low, especially for convenience products, to differentiate ourselves from the competition. »

But with abundant production, in monoculture, as well as the risks of disease, is there not a danger that one day the famous Cavendish will no longer be available? Yes, believes Pascal Thériault. According to him, consumers will inevitably have to get used to buying other varieties.

Quite a change in habits, he anticipates. “We’re going to have to get used to eating a banana that tastes different from what we’re used to,” warns Mr. Thériault. We all have preferences in apples, but a banana… it tastes like banana. »

Mayrand has already begun the transition to the smaller, more durable Cabana. It now remains to be seen how banana lovers respond.


source site-55