U.K.-based non-profit cooperative Banana Link believes the proposed tie-up between two major supermarket chains will likely squeeze banana suppliers' earnings.

Sainsbury's recently reached a deal with Walmart to merge with its U.K. subsidiary, Asda. The deal between the country's second and third-largest supermarket chains respectively - behind Tesco - would see the creation of a new grocery market leader.

The NGO said that it has for 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.

It said that this had resulted in a negative impact on earnings and working conditions for plantation workers, and even threatening the survival of small-scale producers.

"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," Banana Link said.

"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 [US$0.04] off the current price per kilo, or 12p [US$0.16]  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, it did note there was a potential upside, saying that 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," it said.

"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 therefore provide an opportunity for greater commitment to the ethical sourcing of tropical fruit, it said.

Nation Farmers's Union Scotland chief executive Scott Walker 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”. 

Banana Link also welcomed the recent announcement by the European Commission of proposed legislation on unfair trading practices in global food supply chains. 

“Banana Link has worked constructively with Sainsbury's and ASDA for many years, both individually and through the World Banana Forum, to support their ethical buying practices," said national coordinator Jacqui Mackay.

"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”. 

www.freshfruitportal.com