1. International Forum on Bananas and Fresh Fruit
The Impact of the Financial Crisis on Agriculture and in particular the demand and consumption of Bananas and Fresh Fruit in Europe
Professor John Moverley OBE
Senior Consultant, Bidwells Agribusiness, UK

2. Introduction We live in interesting times
TIMELINE
Oil price rises – cost increases/ inflation
Re-emergence of the food security issue
A changing world – dietary, population
A Financial Crisis

3. Introduction We live in interesting times
CUSTOMER RESPONSE
Trading down
Price cutting
Unemployment & Insecurity
Cut back on recognised luxuries
New luxuries – certain food items

4. My Presentation The Credit Crisis in Europe Demand & Supply for food
Impact on Agriculture
Consumption and Demand for Bananas and Fresh Fruit
Impact of the Credit Crunch on Consumption and Demand
Policy and Market Responses
The Future

5. The Credit Crisis Origins The Spread from the USA to Europe
The ‘Decoupled Theory’ is proved wrong
15 September 2008 – ‘D Day’
The UK vs the Eurozone
The lending crisis
General Impact on European Consumers

6. Real GDP Growth and Trend
Source: IMF

7. The UK Position: GDP
Source: UK Office of National Statistics

8. What can history tell us?
"Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take a more interventionist stance."  
1867

9. Impact on European Agriculture
People still need to eat
Production agriculture – commodities versus fresh produce – retail dominance more critical
Fruit – policy drivers
Fruit & Vegetables – health & local
Fruit – necessity or ‘luxury’

13. So how recession proof are the drivers?
Demand pull
(i) Population
(ii) Dietary shift
(iii) Policy changes
(iv) Bioenergy
Supply Constraints
(v) Land
(vi) Climate Change & Water
(viii) Technology

14. Dietary Shift

15. Impact of Biofuels on Demand
Demand for Food, Feed & Biofuel
billion metric tons
Source: Goldman Sachs Commodities Research

16. So how recession proof are the drivers?
Demand pull
(i) Population
(ii) Dietary shift
(iii) Policy changes
(iv) Bioenergy
Supply Constraints
(v) Land
(vi) Climate Change & Water
(viii) Technology

17. Production Yield Relative to Demand
Source: FAO Food Price Index, USDA, Goldman Sachs Commodities Research

18. Commodities & Agriculture: Just how ‘recession proof’ – what can history tell us?

19. Global Consumption and Demand of Bananas and Fresh Fruit
Background and Trends
Some basic information – with health warning
Major Consumers

20. Global Production of Fresh Fruit

21. Banana and Fresh Fruit Consumption in Europe
Market and Consumption
Trends – pre and post credit crisis
Policy Effects
EU Banana Regime
EU Fruit and Vegetables Regimes
Grow Local

22. Global Banana Production and Consumption 2003-2007
Exports
Production

23. Global Banana Production Import Averages 2002- 2006

24. Geographical distribution of bananas imported in the European Union, 1990-2007
Source: UNCTAD Secretariat from COMTRADE statistics

25. Banana and Fresh Fruit Consumption in Europe
Market and Consumption
Trends – pre and post credit crisis
Policy Effects
EU Banana Regime
EU Fruit and Vegetables Regimes
Grow Local

26. Agricultural Policy Impacts
EU Banana Regime
EU Fruit and Vegetables Regime

27. Food Policy Drivers EU School Fruit and Vegetable Scheme
UK ‘5 a day initiative’

28. Fresh Fruit Consumption in EU
Detail needed

29. Market
From 2002 to 2006, EU fruit consumption grew by 2.7% according to CBI
Yet in 2007, total gross supply of fruit per capita stood at 91 kg (compared to an average of 97 kg over the previous five years) according to the “2008 Production, Trade, Supply and Consumption Monitor in the EU-27”
Still well below WTO recommended levels
The distinction between traditional & tropical fruits

30. Production and Consumption Trends
The EU is a major producer of fresh fruit and vegetables.
Most fruit and vegetable production is concentrated in the southern countries such as Spain and Italy. From 2002 to 2006, fruit production increased, although by less than 1%, The main fruits produced are apples, oranges and grapes.
Consumption trends increasing in tropical fruits which cannot be grown in the EU.

31. Examples of EU Fresh Fruit Imports

32. Recession and Bananas: What does Economic theory tell us?
Income Elasticity of Bananas in Europe =0.6
A measure of responsiveness of demand for a good to change in income of people
Price Elasticity of Demand = 0.4
A measure of how responsive the demand is to price change

33. Recession and Bananas: What does History tell us?

34. Live Research Data – Major European Supermarket
Conventional
Organic
Fairtrade

35. Selected Subgroup(s): Conventional Apples, Bananas, Carrots and other fruits and vegetables
Previous Period: 52 weeks from 26-Mar-07 to 23-Mar-08Most Recent Period: 52 weeks from 24-Mar-08 to 22-Mar-09
Sales Value
Index
Sales Volume
Conventional Apples
£158,726,626
105
130,506,550 98
Conventional Bananas
£116,489,974
168,879,830
101
Conventional Citrus Fruit
£144,235,673
107
175,109,730 99
Conventional Grapes
£150,674,920
86,119,900
104
Conventional Pears
£47,683,324
120
40,793,330
102
Conventional Soft Fruit
£168,905,563
106
85,121,920
Conventional Stonefruit
£67,459,055
62,775,450
108
Conventional Carrots
£50,524,921
113
98,653,770
Conventional Cauliflower And Broccoli
£64,703,283
79,205,710 93
Conventional Onions
£53,766,116
95,138,780
103
Conventional Potatoes
£251,551,547
109
194,715,570
100
Fair Trade Citrus Fruit
£1,685,470
1,291,400
Fairtrade Bananas
£7,068,007
129
7,072,100
138
Fairtrade Grapes
£13 20
Fairtrade Pears
£15 10
All Products
£1,283,474,506
1,225,384,070

36. A leading supermarket – huge price cuts The loss leader principle
UK Banana Wars
A leading supermarket – huge price cuts
The loss leader principle
Impact on supplier now
Impact on supplier future
Links to other fruits

37. Selected Subgroup(s): Conventional Apples, Bananas, Carrots and other fruits and vegetables
Previous Period: 52 weeks from 26-Mar-07 to 23-Mar-08Most Recent Period: 52 weeks from 24-Mar-08 to 22-Mar-09
Customer Penetration
Index
Purchase Frequency
Average Price Per Unit
Conventional Apples
62.29% 98
9.28 96
£1.22
106
Conventional Bananas
66.72% 99
11.75
£0.69
104
Conventional Citrus Fruit
63.22%
101
8.10
100
£0.82
108
Conventional Grapes
55.61%
102
7.65 97
£1.75
103
Conventional Pears
35.84%
5.75
£1.17
117
Conventional Soft Fruit
50.16%
6.27
£1.98
Conventional Stonefruit
43.12%
4.74
£1.07 92
Conventional Carrots
59.17%
8.33
£0.51
109
Conventional Cauliflower And Broccoli
48.03%
7.49
105
Conventional Onions
61.94%
7.37
£0.57
Fair Trade Citrus Fruit
3.69% 93
1.45 95
£1.31
Fairtrade Bananas
14.66%
128
2.37
£1.00
Fairtrade Grapes
0.00%
1.00
£0.64 35
Fairtrade Pears
£1.49
All Products
87.48%
23.25
£1.05

38. Selected Subgroup(s): Organic Apples, Bananas, Carrots and other fruits and vegetables
Previous Period: 52 weeks from 26-Mar-07 to 23-Mar-08Most Recent Period: 52 weeks from 24-Mar-08 to 22-Mar-09
Sales Value
Index
Sales Volume
Organic Apples
£8,215,791 82
4,438,540 80
Organic Bananas
£15,107,28 92
12,931,580 87
Organic Citrus Fruit
£2,350,309 76
2,062,810 68
Organic Grapes
£1,595,774 90
848,390
Organic Soft Fruit
£5,610,289
101
2,451,220 93
Organic Stonefruit
£1,918,150 89
1,014,140 81
Organic Pears
£2,550,181 88
1,448,050 83
Organic Carrots
£7,758,708 91
7,751,750 73
Organic Cauliflower And Broccoli
£3,542,430 85
3,046,460
Organic Potatoes
£11,305,67 86
8,709,470
Organic Onions
£1,981,001
1,897,220
All Organic Vegetables
£43,568,463
38,566,870
All Organic Fruit
£40,046,472
27,282,400

39. Selected Subgroup(s): Organic Apples, Bananas, Carrots and other fruits and vegetables
Previous Period: 52 weeks from 26-Mar-07 to 23-Mar-08Most Recent Period: 52 weeks from 24-Mar-08 to 22-Mar-09
Penetration
Index
Purchase Frequency
Average Price Per Unit
Organic Apples
7.94% 81
2.55 95
£1.85
102
Organic Bananas
18.91% 88
3.41
£1.17
106
Organic Citrus Fruit
5.15% 72
1.78 92
£1.14
111
Organic Grapes
2.77% 91
1.51
£1.88
100
Organic Soft Fruit
6.07% 89
£2.29
109
Organic Stonefruit
3.54% 80
1.41 97
£1.89
110
Organic Pears 75
2.01
£1.76
Organic Carrots
10.29% 67
3.71
£1.00
125
Organic Cauliflower And Broccoli
6.87% 79
2.23 99
£1.16
104
Organic Potatoes
16.75% 96
2.38
£1.30
Organic Onions
4.68% 84
2.00
£1.04
115
All Organic Vegetables
37.32%
3.91
£1.13
All Organic Fruit
31.06%
3.67
£1.47
107

40. What’s the position with organic?

41. Introduction

42. Conclusion (1)
Volatility will persist – consumer confidence will recover but slowly
Prospects depend upon individual government plans & global recovery
Coming out of the recession? Upturn?
Greece
France
Netherlands
Ireland UK
Source European Commission Jan 2009

43. Conclusion (2)
After a period of steady and slow growth, traditional fresh fruit consumption in Europe is slowing, even with policy incentives like the School Fruit scheme being developed
Increased range of fresh fruit available & improved storage mean greater consumer choice
Quality continuing to be priority

44. Conclusion (3)
There is a shift in EU fruit eating habits towards more non-indigenous tropical fruits. However bananas have always been, and remain a key staple or ‘luxury
Growing need for information & importance of consumer rights
Impact for fresh fruit and bananas is not income or price dependent (except for the very poorest) and history shows us demand is resilient during recessions.

45. Conclusion (4)
Impact of EU Banana Policy Reform is likely to favour EBA and Dollar Bananas at the expense of ACP Bananas.
Looking at very recent UK Retail Data:
Ethical issues such as Fairtrade appear to be more resilient to the economic downturn
Organic seems to be being hit by the economic downturn
We believe there is generally a positive outlook for fresh fruit and bananas in the EU over the next few years and see no reason why the current trends will not continue.

46. The Fundamentals World food demand could double by 2050 Food Security?
50% increase from world population growth all in developing countries
50% increase from successful poverty reduction – development = food demand
Food Security?
850 million people were chronically hungry before the food crisis of 2007 (UN)
1 billion people are the current number of chronically hungry (FAO)
Credit Crisis or Food Crisis?

47. A final thought…..
The United Kingdom Fresh Produce Consortium (FPC) found last year that the average UK consumer eats just 2.5 servings of fruit and vegetable a day. Without a dramatic change in eating habits it could take another 25 years for consumers to meet the recommended 5-a-day, it said.
March 2009

49. Thank You Professor John Moverley OBE Bidwells Agribusiness
Trumpington Road
Cambridge CB2 9LD
United Kingdom
t: (+44) XXX e: