Municipio de El Jícaro

Supermarkets are major outlets for FFV in Europe, although market shares vary in each country."

The Northern European markets, including the Netherlands, have the highest proportion of FFV sales through supermarkets. Figures for the Netherlands for 2005 are showing that the trend is continuing.53 _{In Italy and Spain, traditional markets and}

figure 7: The Netherlands, retail distribution of fresh fruit and vegetables in 2002, % of volume

Source: Productschap Tuinbouw 2003, quoted in CBI, EU market survey – Fresh fruit and vegetables, April 2005, p.86.

figure 8: France, retail distribution of fresh fruit and vegetables in 2003, % of volume

Source: Ctifl / Secodip, 2004.

Source: Ctifl/Secodip,2004, quoted in CBI, EU market survey – Fresh fruit and vegetables, April 2005, p.83.

figure 9: The UK: retail distribution of fresh fruit and vegetables in the UK, % of total retail sales

Source: www.austrade.gov.au, quoted in quoted in CBI, EU market survey – Fresh fruit and vegetables, April 2005, p.84.

figure 10: Italy, retail distribution of fresh fruit and vegetables in 2001, % of total sales

Source: CSO Centro Servizi Ortofrutticoli, 2005, quoted in quoted in CBI, EU market survey – Fresh fruit and vegetables, April 2005, p.83.

The situation in Germany needs special attention. The discount stores have the largest market share of FFV sales, larger than supermarkets and hypermarkets together. Over recent years, discount stores have been increasing their market share in other European countries, for example in France.

superettes traditional

stores 2%

figure 11: Germany: retail distribution of fresh fruit and vegetables in 2002-2003, market share

Source: CBI, EU market survey – Fresh fruit and vegetables, April 2005, p.82.

Marketing strategies of the major retailers

Major retailers use two distinct strategies for selling FFV. First there are ‘service supermarkets’ that offer a complete range of fruit and vegetables all year round. These service supermarkets are increasingly supplied by one or more FFV distributors (see below). Secondly, there are ‘discounters’ who sell fruit and vegetables at the lowest price– quality ratio of the week or who attract consumers with all year round low prices for FFV. These discounters are supplied by wholesale traders or distributors who are structured to meet their needs, and by spot markets."

There is little information about the FFV sourcing by hypermarkets, who might fall under both categories.

1. Supermarkets

Supermarkets use fresh fruit and vegetable displays to demonstrate store quality and appeal to new clients.

Supermarkets cater for their customers’ lack of time by offering prepared fruit and vegetables and ready meals. Small shops are unable to deliver this service and offer fewer products to their customers.55

Supermarkets and large retail chains have the capital to invest in health and safety requirements and in new marketing strategies.

FFV producers need to comply with various supermarket and EU legal requirements. These include the introduction of EUREPGAP certification from 2002 (see chapter 5) 56 _{and others relating to packaging, tracking and tracing}

origin. It is reported that the cost of these additional requirements are often not covered by the prices offered by the retailers to the producers.

Supermarkets are able to relocate to more convenient places for customers, which further erodes small shopping centres.

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Price wars by supermarkets increase the price differences between large supermarkets and small shops, making it very difficult for the latter to survive.57

Although fresh fruit and vegetables are not always affected, the price war started by Asda/Wal-Mart in the UK included bananas, resulting in a large price reduction for consumers. In the Netherlands, Albert Heijn started a price war in October 2003, which was followed by the other supermarkets but bananas and other FFV were only included in a later stage.

Fresh produce provides the highest margins for supermarkets (30% - 40%).58 _In

the UK, the price war led Asda/Wal-Mart to slash its FFV margin from 32% to 22%. Other major retailers have tried to slash the supplier prices, rather than reduce their margins or maintain consumer prices.59

2. Discounters

Discounters offer the lowest possible prices but sell a more limited range of products.

Discounters look for the cheapest price available, for instance on the FFV spot markets and wholesale markets. This determines the range of fruit and vegetables they sell.

Discounters are satisfied with 10% overall net margins.

Trends and critical issues

Supermarket sales of FFV are expected to continue to rise.60 _{Similar increases}

are expected in other outlets, for example in petrol stations.61

The growth in FFV sales through discounters appears to be the most significant trend that continued in 2005. The growing appeal of the discount concept within the European retail sector has influenced pricing policy amongst the traditional supermarket chains. Permanent price wars in some countries, which often include FFV, are the consequence of this competition. This is pressing down prices up to the producer.

The low prices from discounters and price wars between supermarkets have been felt amongst others by South African producers. Europe had long been a preferred market which they supplied all year round with reasonable returns. Now, they face decreased returns and profits margins. At the same time, production costs have gone up due to an unfavourable exchange rate, ever-stricter food safety standards, and the pressure to invest in more varieties. “As a

consequence, South Africa’s grape sector is in crisis, mango shipments are down and the avocado market is looking very tight." The new markets in the new EU countries offer some hope but prices in these markets are lower than those previously available.

According to Banana Link, the price wars have led to a race to the bottom in banana prices and ever more extreme exploitative labour practices at the plantations.

Concentration and vertical integration means that prices are determined less and less in “the market” and farmers have fewer references to judge what is a fair price from the supermarkets. As a result, they are more vulnerable to price manipulation."