“The middlemen should get out of the way”
DESPITE clear signs that consumption has slowed down in Cyprus in response to the economic crisis, food prices seem to just carry on rising, leaving consumers puzzled as to the reasons why.
After talking to a number of different players in the fruit and vegetables market – from the smallest to the biggest – the Sunday Mail has uncovered the stark reality of how prices are being pumped up by the supply chain when it comes to agricultural produce.
We checked recently on the prices displayed for local produce by three retailers in Strovolos within one kilometre of each other: small retailer P.Ioannou, Pilavakis supermarket, and one of the AlphaMega stores. We found that the small retailer – selling local produce bought at Nicosia’s wholesale fruit and veg market – was significantly cheaper overall for similar quality produce than the two larger outlets. Tomatoes were priced at €1.70, €2.20 and €2.43 per kilo respectively, field cucumbers at €2.60, €3.30 and €3.79 per kilo respectively, and lemons at €0.45, €0.85 and €0.93 per kilo respectively.
Mihalis Pilavakis, proprietor of Pilavakis supermarket, explained that he always aims to buy Cypriot produce, direct from big growers or growers’ associations.
“If something is not seasonally available, we’ll buy imported produce, and if customers ask us for something we don’t have, we’ll look at sourcing it wherever we can,” he said. As for pricing, “we’re not unreasonable. Apples may cost us €1.25 and €1.40, and we’ll sell them at €1.75. We add a certain percentage to cover our costs and a profit, and that’s it – it’s logical.”
Andreas Avraamides, floor manager of AlphaMega’s Engomi store, defended supermarket pricing: “You can’t simply count the difference between our purchase and sale price as profit. Supermarkets buy from the wholesaler by the crate, but sell by the kilo or even half-kilo. We have very significant wastage, due to trimming, damage and over-ripening. Then you have to add in labour costs, overheads and profit. We operate on a very different cost-basis than the local shop run by a husband-and-wife team.”
Imported produce can sometimes be cheaper to source than local, and certainly more readily available, which means it is more attractive to wholesalers and retailers. Avraamides said that what the grower gets for his produce “is not our affair – that’s down to our supplier, the wholesaler”.
“For example, growers in Greece have the advantage of subsidies, cheaper water and labour, and the bigger growers can mechanise enough of their operations to lower their costs even further,” he said.
But based on the evidence, retailers with roughly similar costs and overheads are not setting similar retail prices. According to figures provided by the Commerce & Industry Ministry’s Competition and Consumer Protection Service (see tables), an islandwide survey of the big supermarkets on April 2 showed major price differences – at least 25 per cent across the board – for produce which we can assume was of the same quality. In the case of field cucumbers, the difference was sometimes over 100 per cent.
In a similar survey of small supermarkets (April 7), there was a noticeably large difference with the big supermarkets. The five-day gap between the surveys means that this difference could be due to lower supply prices rather than pricing strategy. However, what is certain is that the price range for each item is much narrower than that of the big supermarkets.
What is also clear is that with the rise of the supermarket chains, the small traditional producer is being squeezed out of the market by the pressures and demands of the bigger players.
These structural changes are not unique – similar developments have been seen in most other European countries in recent years, leading to the food market being dominated by a few large supermarket chains.
As commercial buyers have become bigger, wholesalers and growers’ associations – where small growers in a particular area club together to market their produce collectively – have eclipsed the smallholders. Supermarkets generally prefer to deal with suppliers who can reliably provide availability, quantity, uniform quality for better display, and price discounts on large purchases. This has given extra importance to the prices struck in the island’s main wholesale markets.
Those smallholders who either cannot or choose not to participate in a growers’ association simply cannot grow enough produce to make the bulk pricing system worthwhile. Their choice is reduced to either selling their produce direct to consumers in open markets, accepting a middleman’s offer price, or simply calling it a day.
The Sunday Mail talked to two growers selling their own produce at OHI market in central Nicosia. Yiorgios Patsalis from Paralimni was selling tomatoes at €2.00 per kilo when the local supermarkets were charging €2.20-2.45.
“I’ve been farming for 34 years, and bringing my produce to the Nicosia market myself for 15 years, twice a week,” he said. “I prefer to sell direct to the consumers, so that I’m satisfied and they know they’re buying good quality. I was in the growers’ association, but they chucked me out 10 years ago because I insisted on coming to market myself. The middlemen should get out of the way.”
Maria Malekkou from Kalo Chorio has been selling at open markets for over 20 years. She was selling her cabbages at €1 each, more than five times the price she would have got from middlemen or merchants. “I would only get €1, or even €0.50 for a crate containing five or six cabbages from a merchant,” she said. “How are you going to pay for your fertiliser, your herbicide, your irrigation-water, your labour out of that? We used to be in a growers’ association, but at one point we couldn’t make it pay any more, so since then we’ve been selling direct at open markets.”
Meanwhile, as the proportion of produce sold through supermarkets grows, consumers in Cyprus are also adapting to the supermarkets’ selling techniques – they are starting to perceive quality as having more to do with the appearance of produce rather than its taste.
Although many say that local bananas taste better than South American imported ones, the younger generation has already got used to the better-looking and bigger imports. Avraamides is convinced that consumers increasingly shop with their eyes: “Personally, I think that Cypriot produce sometimes loses out in terms of appearance [although] in terms of flavour, a lot of Cypriot produce is much better than imported produce.”
The general manager of a large wholesale company based in the Nicosia wholesale market, who preferred not to be named, agreed with Avraamides: “Local tastes set the demand for particular produce. The local banana producers cannot compete with the imports. But then again, if you have land in Peyia, why grow bananas, why not build something?”
[SIDEBAR]
How the retail price builds up
At 5am every Monday, Thursday and Saturday, representatives of the growers’ associations, big growers and Nicosia wholesalers meet at the Nicosia wholesale fruit and veg market and agree the opening price for each kind of produce. This opening price is then used as the benchmark for each individual negotiation of a supply price for the whole island. For example, if the opening price is €2.00 per kilo, then depending on the availability and quality of the produce that day, plus any discounts granted for a large purchase, the final sale price may be €1.50 per kilo.
If the grower is big enough to deal direct, then he will receive €1.50 per kilo net from his customer. If on the other hand, he is selling through a growers’ association, then he w
ill clear €1.39-1.43 after the association has taken its 5-7 per cent fee. Smaller or independent growers who sell to the wholesale market through a middleman or merchant will most likely pay at least 15 per cent commission out of the sale price, clearing €1.12 or less. Unscrupulous middlemen can mislead the small grower regarding the opening price, and may pay the grower much less than €1.12 per kilo.
If the buyer is the Cyprus Association of Fruit Market Owners or an individual retailer, then the €1.50 per kilo purchase price will most likely translate into a retail price upwards of €1.70.
If the buyer is a wholesaler, then he will add a gross margin of 15-20 per cent, covering all costs plus profit, and sell on to a retailer at €1.70-1.80. That retailer, most likely a large supermarket, will add a gross margin to cover costs – including wastage – plus profit, and may put the produce on sale for €2.30-2.50 per kilo in healthily competitive conditions, or more if it thinks the market will pay.
[SIDEBAR/TABLES]
Price comparisons
Big supermarkets, 2 April
Nicosia
Limassol
Larnaca
Paphos
Famagusta
Tomatoes
€2.15-2.60
€1.45-2.99
€1.99-2.49
€1.90-2.60
€1.80-2.50
Cucumbers
(greenhouse)
€1.99-2.65
€1.75-2.69
€1.79-2.65
€1.45-2.65
€1.60-2.75
Cucumbers
(field)
€2.70-4.65
€2.40-4.79
€2.10-4.65
€2.79-4.79
€2.30-4.69
Potatoes
€0.79-0.97
€0.75-1.29
€0.65-0.99
€0.72-0.97
€0.64-0.97
Onions (local)
€0.75-1.25
€0.50-0.69
€0.61
€0.75-1.05
€0.60
Small supermarkets, 7 April
Nicosia
Limassol
Larnaca
Paphos
Famagusta
Tomatoes
€1.75-2.50
€1.75-2.40
€1.70-2.60
€1.95-2.50
€1.95-2.40
Cucumbers (greenhouse)
€0.60-1.25
€1.00-2.20
€0.69-1.30
€1.00-1.40
€1.00-1.60
Cucumbers (field)
€1.35-2.25
€1.80-2.20
€1.90-2.40
€3.95
€1.80-2.25
Potatoes
€0.60-0.75
€0.60-0.85
€0.60-0.95
€0.75-1.15
€0.60-0.80
Onions (local)
€0.50-0.90
€0.55-0.70
€0.65-0.70
€0.50-1.00
€0.70
