Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now

×

The banana gauge: How do banana prices affect food retail?

(Photo: Flickr user
Ian Ransley)

The average American consumes 25 pounds of bananas per person, per year, according to the Economic Research Service division of the USDA.

These consumption numbers translate into big sales for local, regional and nationwide grocery retailers. Perhaps not surprisingly, bananas are in the club of heavy-hitting, perimeter-of-the-store staples, such as milk, eggs, baked goods and deli items. In fact, bananas are the number-one saleable grocery item in the US today, according to the USDA ERS.

“We sell more bananas than anything else in our store,” says a produce and deli manager at Harvestime Foods, Chicago, who prefers to remain anonymous. “For us, second to the sales numbers of bananas, are limes and tomatoes.”

Interestingly, in many areas of the country, bananas have experienced a significant price reduction over the last 18 months – which, in some ways, seems in contrast with the fruit’s popularity and demand among US consumers.

Each year, the Bureau of Labor Statistics releases a report regarding the average retail food and energy prices in the US and Midwest. According to the 2015 numbers, which were released in September of this year, bananas decreased in price by 4.3% since a year ago at the same time.

The BLS states that in 2014, the average price of bananas, nationwide, was $.60 per pound. A mere 12 months later, that price dropped to $.58 per pound.

The per-pound calculation is a slippery slope, with wholesale retailers such as Sam’s Club and Costco, and even Aldi, selling America’s favorite fruit in a pre-weighed, plastic-wrapped, set-priced bag. However, for those retailers who can set their price, they have used bananas as a bargaining tool to intrigue customers.

In economics, it’s not favorable to use the word “price war” but, in banana sales, it may seem as if just such has taken place. For example, in 2013, in the Chicago-land area, where shelf space is coveted and contentious, the average price of bananas was $.60 per-pound. Shortly thereafter, a new name — Mariano’s – began its outreach from the chain’s flagship store in Arlington Heights, Ill., and made its way into the aggressive Chicago market.

How did Mariano’s make fast friends with Chicago consumers? By offering bananas at a staggering $.29 per pound. What’s more, that price point has not faltered since the store’s entrance into the city limits.

As can be predicted, Chicago-area retailers responded with their version of the $.29 per-pound banana. In the course of 18 months, consumers in the region were inundated with print, radio and digital ads showcasing the various avenues by which they could purchase bananas at $.29 a pound.

In mid-2014, Chicago’s most notable grocery retailer, Jewel-Osco, Itasca, Ill., began offering bananas at the coveted $.29 price point. However, as of print date, the retailer currently runs sales of the fruit – offering the $.29 price point three of seven days a week.

As we begin to turn the page on 2015, the “peel back” on the banana discounts has started to show. According to one surveyed consumer, Kelly Krayniak-Maki of Hobart, Ind., a suburb of Chicago, who notes she shops at a variety of grocery retailers in her area, “I’ve noticed that bananas aren’t on sale any more like the used to be,” she says. “I used to be able to find banana’s for $.29 a pound in the past and haven’t noticed stores having sales like that in a the last several months.”

Is banana excitement coming to an end? If so, it makes sense. For starters, the fruit is extremely inefficient to provide to US consumers. Secondly, banana growers are facing a fungal disease that could wipe out the Cavendish, the variety that comprises about 95% of the world’s crop of the fruit. According to a 2008 report published by Dan Koeppel, author of “Banana: The Fate of the Fruit That Changed the World”:

“That bananas have long been the cheapest fruit at the grocery store is astonishing. They’re grown thousands of miles away, they must be transported in cooled containers, and even then they survive no more than two weeks after they’re cut off the tree. Apples, in contrast, are typically grown within a few hundred miles of the store and keep for months in a basket out in the garage. Yet apples traditionally have cost at least twice as much per pound as bananas.”

Yet, American consumers demand, and seek out, the lowest-priced banana. And, it’s supplied without pause. Is this a cost or a benefit to consumers? The discussion is elaborated further by Dan Koppel:

“In recent years, American consumers have begun seeing the benefits — to health, to the economy and to the environment — of buying foods that are grown close to our homes. … [B]ananas have always been an emblem of a long-distance food chain. Perhaps it’s time we recognize bananas for what they are: an exotic fruit that, someday soon, may slip beyond our reach.”

______________________________________________

If you enjoyed this article, join SmartBrief’s email list for more stories about the food and beverage industry. We offer 14 newsletters covering the industry from restaurants to food manufacturing.