The Economics of Bananas
Yesterday, I had the unexpected opportunity to speak with a former executive of a major fruit and produce company. I always find it really fun to talk with someone about something I know nothing about – and in this case, the topic was bananas. So, I asked him about the economics of bananas, and this is what he said:
- Depending on location, retail price is ~$0.70 per pound.
- That retailer buys them by the box which is 40 pounds. So $28 is the retail revenue per box.
- The producer charges the retailer $12 for the box.
- The retailer also incurs additional costs for 7-days of storage and refrigeration at 56 degrees for ripening.
- The producer pays $10-$11 in costs for that box ($6-$7 for pick and pack, $1 for packaging, $2.50 for shipping, and $1 of marketing/sales overhead)
- Within a few hours of picking, the bananas are stored and shipped in refrigerated containers at 56 degrees. Shipping can take 7+ days.
- The picker probably makes ~$12/day and is paid per stem picked.
It’s always interesting to look at a supply chain of a product and decipher where in the chain you’d want to be. In this case, I’m happy to be the one eating the banana.