Asda – Sainsbury’s merger: threat or opportunity?

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Banana Link has for many years documented the race to the bottom in the banana industry, with supermarket buying power and unfair trading practices driving down the prices they pay to tropical fruit suppliers, and the consequent negative impact on earnings and working conditions for plantation workers. Or, in the case of small-scale producers, threatening their very survival. 
The recently proposed merger between Asda and Sainsbury’s raises the prospect of an even more powerful buyer, able to exert even more pressure on prices by squeezing suppliers even further. Sainsbury’s have announced that the merger could lead to price cuts in their stores of “around 10 per cent on many of the products customers buy regularly”. And in the case of bananas, 3p off the current price per kilo, or 12p from the cost of a pack of eight Fairtrade bananas. 
For too long, low prices for bananas in our supermarkets have been synonymous with squeezing suppliers. The prospective merger will therefore not come as good news to already struggling suppliers of bananas and other tropical fruits to the UK market. 
However, there is a potential upside. Sainsbury’s and ASDA both have demonstrable commitments to ethical sourcing of bananas. 100% of Sainsbury’s bananas carry the Fairtrade label, which ensures fair minimum prices for suppliers which cover the costs of sustainable production. Both are members, along with Banana Link, of the World Banana Forum, which brings together stakeholders in the global banana supply chain to work towards consensus on best practices for sustainable production and trade.
The increased buying power and greater economies of scale of the merged retailer could provide an opportunity for greater commitment to the ethical sourcing of tropical fruit. As NFU Scotland Chief Executive Scott Walker has said, “there is an opportunity here for potentially the biggest player in the UK’s retail sector to put in place a system of responsible sourcing and to end the spectre of Unfair Trading Practices by supermarkets”. 
The recent announcement by the European Commission of proposed legislation on unfair trading practices in global food supply chains comes as welcome news. By protecting small and medium-sized food suppliers against abusive practices of large buyers, it aims to address insecurity among supermarket suppliers, which directly impacts the most vulnerable people in the supply chain. 
Jacqui Mackay, Banana Link National Co-ordinator said:
Banana Link has worked constructively with Sainsburys and ASDA for many years, both individually and through the World Banana Forum, to support their ethical buying practices. We hope that the merged retailer will take a lead in ethical sourcing by ensuring that the prices it pays cover its suppliers’ costs of sustainable production and that any projected price cuts are not be made at the detriment of tropical fruit workers and small-scale farmers that produce our favourite fruit”. 
Photo: The Grocer