Why Imported Tinned Tomatoes Are So Cheap

Tinned tomatoes are insanely cheap. I routinely purchase a 400 gram tin of store brand tomatoes for 60 cents, even though they're imported from Italy. How is that possible? A recent government investigation provides some clues — and suggests prices might be about to go up.

The Anti-Dumping Commission has been investigating whether or not tinned tomatoes imported from Italy are being "dumped" on the market — that is, been sold for less than their actual value. That can happen if a national government decides to subsidise farmers directly, meaning they can sell goods for less than cost. The Commission has concluded that this has happened with some tinned tomato imports.

The investigation was launched at the request of SPC Ardmona, which is the dominant local producer of tinned tomatoes. SPC Ardmona has been in the headlines recently over its requests for government assistance to continue operating. (The Federal Government seems disinclined to assist, though it has emerged that many of its claims about excessive worker entitlements weren't actually correct.)

Whatever happens there, the Commission has recommended that tariffs of up to 26.35 per cent be applied to over 100 imported brands in order to restore a competitive market. Those account for more than half of all imported tomatoes. If that happens, then prices for those goods is likely to rise. A final decision won't be made until the end of the month. (Additional tariffs have been applied in the past, but were removed in 2007.)

While it's filled with lots of tedious economic jargon and tortured syntax and some of the juicy detail hasn't been made public, the report does provide a good overview of how the tomato market works. It was based on interviews and requests for information to major exporters and supermarkets, though not everyone co-operated (ALDI was one notable holdout).

In 2013, the total market for tinned tomatoes (include whole tomatoes, diced tomatoes and ones with fancy flavourings added) was 54,000 tonnes. Remarkably, despite the fact that there are more varieties than ever and the prices are lower than they used to be, that was down 8.9 per cent from 2010. No wonder we've seen marketing stunts such as bringing Florence Henderson to Australia to talk up tinned tomatoes:

While you can pick up tinned tomatoes in delis and fruit stores, 82 per cent of sales are through the major supermarket chains: Woolworths, Coles, ALDI and IGA. Those stores sell both their own supermarket brand "private labels"- often in a bargain basement version (Home Brand or Savings) and a more expensive alternative (Select or Coles)— as well as various imported brands and the Australian SPC Ardmona products.

The super-cheap dumped options have had an effect on prices across the board:

A comparison of weighted average selling prices over the investigation period shows that Italian prepared or preserved tomato retail prices for chopped, diced and whole peeled tomatoes were between 16% and 55% below SPCA's prices. For value added products, the Italian retail prices were below SPCA's prices by approximately 30% to 35%.

You can also see that in this chart, showing the typical prices for various categories across 2013, with the Australian branded product the most expensive:

SPC Ardmona has picked up contracts to produce some of the store-brand versions, but usually for the higher-priced variants. Those contracts typically run for a year, so we might not see an immediate price rise on the imported options even if the tariffs are approved. However, it seems all too likely that we'll see prices go up before the end of 2014:

The Commission considers that purchases of Italian imports at dumped prices have allowed retailers to maintain their reduced shelf prices for generic private label products and provide for a margin of undercutting that is greater than what it otherwise would have been in the absence of dumping.

In other words, if the tariffs eliminate the price benefit of dumping, we can expect the price of every tinned tomato option to go up. Given how cheap the entry-level options are, a rise in price won't be the end of the world for most budgets. However, if you're inclined to stock up, now would be the time.

We're also likely to see a reduction in choice. SPC Ardmona has declined to pitch for some supermarket tenders because it says it's not possible to do so profitably, and the report notes that one Italian exporter has also turned down contracts because the suggested price was less than the cost of production.

One other useful lesson? The report confirms that there's a definite quality difference if you buy diced tomatoes rather than whole ones. Tomatoes are sorted at the processing line; the rattier looking ones are converted to juice, which is used as filler in the diced products.

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Comments

    Since when is a competitive market one where everything costs more? Typical gov, all they want is higher prices for everything so they can tax more.

      You grow tomatoes and sell them. You need to sell them at a price that covers your costs.
      An Italian gets partially paid by his government to grow and sell tomatoes. He can then sell his for much cheaper to cover his costs. He has excess so he sends it to Australia and sells it off even cheaper. Getting some money is better than throwing it out and getting nothing.

      This is not fair to you as you are not getting government assistance. This is what is not competitive.

      edit.
      As for the tax comment, people do not have infinite money. If they spend more money on tomatoes they will not spend it on something else. So the government doesn't get any more tax.

      Last edited 06/02/14 12:18 pm

        .. Our government does an identical thing for many products.. By the same logic, all government subsidised export products are a bad thing and anti-competitive to locals in wherever they are exported to..

        ... This is all very boring though....

      It's not the government its the productivity commission, and SPC, who are owned by a multi billion international company Coca Cola. Who to date this year from June 13 have turned a profit of over $230 million. Then ask for $25 million.

        Having worked in the past for a huge multinational - sales of 15 billion USD a year - this view that the "Parent is rich, so should prop up it's child" is naïve thinking and not indicative of true corporate behaviour.

        There is no profit in throwing good money after bad. If the child company is failing then almost always a good corporate will cut the losses and close/sell off the failing arm.

        Considering there is a tariff on imported vegetables and fruit I would ask why isn't the money from this tariff going to help the local producers rather than going to fund other things - like $75K for mega-rich Toorak/Watson's Bay women to breed?

        Pay the farmers and producers 100% of the tariff takings to prop them up into a competitive position.

          Very well said. Though I would imagine this is but one possibility.

    It isn't exactly a free market when a government decides to penalise imports to protect local producers. What happened to competition and the effect of demand & supply on prices? No doubt the Italians will retaliate against imported Australian goods.

      They already do. As does nearly every other country in the world, through subsidies to farming, more lax environmental standards, blocks on dumping of goods (ala NZ) and other trade barriers.

      Should dumping be allowed?

        Real question: Do we want to grow our own food, or are we happy to rely on foreign producers and their governments to set the prices for the food we eat?

    I always thought it was just because that's what was scraped off the streets after the La Tomatina festival.

    Is there any Australian industry that doesn't bitch about people wanting imported products because they're cheaper and usually better?

    Our cars suck and are overpriced, and they got government protection.
    Our food is overpriced and they get/want government protection.
    Our retail industry is overpriced and they get government protection in some sectors and want it in others.

    So on, so forth. Stop crying and start competing. If people are being paid too much to pick tomatoes or whatever is raising your bottom line, solve the problem.

    Last edited 06/02/14 3:21 pm

      Main difference here is that the Italian sales are being actively subsidised by their government.

      Basically if a $1 can of tomatoes is subsidised by the Italian government so that it's sold at $0.50, it's no longer "competitive" because the pricing no longer reflects the costs+profits of the actual supplier. You pay $0.50, the supplier gets $1 and the Italian taxpayers pay $0.50, It's pulling money away from the countries that can produce efficiently. Dumping in this manner is usually disallowed by most trade agreements.

      It's not a matter of "stop crying and start competing". They are competing, but the Italian government is rigging the game.

      When the Government puts a tariff of $0.50 on the imported tomatoes, the price is increased to the level where it would be in a market that was not distorted by the Italian subsidies. Pricing is even with the Australian product so it's all once more on a level playing field. If the Australian consumer still buys the Italian tomatoes, the Italian subsidy effectively becomes a transfer from the Italian tax payer to the Australian tax income base.

      The Australian car industry receives(d) the least amount of money out of every other country that are currently making cars.

      So that argument is terrible.

      I would however ask are we going to increase tariffs on cars because of this?

        Perhaps it was the least, but they were still making shitty, uncompetitive products and selling them at premium prices. They were trying to compete with VW, Audi, BMW and such. They should have been trying to compete with Hyundai and work their way up.

        If tariffs are increased all that is going to do is make people buy used cars from the brand they want, not buy new from the local crap.

        Last edited 06/02/14 4:23 pm

          Shitty is an understatement. If it were not for the foreign car market Aussie built cars would not have basics as air con. Mums 06 commodore has wind up rear windows, they were charging BMW prices for a crap car.

    I guess part of the question is whether the Italian subsidies will eventually stop. If they do and we've killed off the local industry, and Italy stops dumping, then we'll be stuck with expensive imports. Nobody's against cheap products right now, but I think some people are being long term-minded and thinking about the possible problems in the future.

    Last edited 06/02/14 4:12 pm

      I don't think it would even be much of an issue though. Italy's production doesn't represent a large proportion of global tomato production and Australia's imports isn't even a blip on the radar compared to the global import/export of tomatoes so the world price isn't affected by Australian production. Italy's subsidised tomatoes are very competitive with Aus tomato prices however there's not much to suggest that Aus production would be particularly or noticeably better than the broader world prices.

      While any restart of an industry has associated costs, tomatoes as a produce category aren't as difficult to restart as grapes or oranges for example (due to the lag between initiation and first quality harvest).

      Another consideration is the easy cross substitution of tomatoes. As prices increase we are more likely to ditch tomatoes for another fruit like bananas or apples. This puts a slight dampener on tomato prices though it's hard to tell how it would play out in reality. It dampens against unusually large prices but there's certainly room for an increase to a more global production cost consistency for Aus importers.

      Last edited 07/02/14 8:46 am

    It is interesting to bag subsidies while ignoring the following facts,

    1. Labour is expensive in Australia, so the cost of the finished product will definitely be more.
    2. China killed production in several countries as their prices were "Dumping" prices since the mid 90's
    3. Would our government only moan and groan about this or actually start industries here, the last time I recollect, they were actively shutting down whatever manufacturing we had.
    4. We might soon become like many other Trading countries, which only make money via trading, no manufacturing or production of any sort. Totally dependent on manufacturers to sell us finished goods and buy our raw materials.
    5. There is a difference in value of the raw materials and the finished goods. Italy buys raw leather (hide) for a fraction of a cost, but then sells the same as a leather jacket for a lot more.
    6. If anyone says that the Australian government does not give subsidies, thats wrong, the tax payers money is spent and spent in millions, unfortunately a major portion goes not to the deserving, but the committees and offices that handle all this as staffing, travel and admin costs.

    And as Aussies, we love to have it all, so we pay no matter what the price, so resellers charge us what they feel.

    A simple example that I can cite is of Homebrand Bakes Beans, this can used to be 0.33 cents when the Dollar was approximately 0.70 US and fuel was approximately 0.80-0.90. Now the same can is 0.70-0.90, the dollar is 0.90 (went through 1.20) and fuel 1.50+. What has changed?

    On one side the government has advertisements on 5 fruits and 3 veggies. The cost of eating fresh, compare that to eating unhealthy at one of the Fast Food joints, it is a no-brainer what is sustainable given the Insurance excess (exponential rise nearly upto 5x) the Council rates, etc.

      Since you're obviously very passionate about this incredibly mundane topic, some notes.

      3. Would our government only moan and groan about this or actually start industries here, the last time I recollect, they were actively shutting down whatever manufacturing we had.

      Governments don't start industries, nor should they. At best, they can encourage industries.

      4. We might soon become like many other Trading countries[...]

      Not a real thing. I would be interested in who you think does this - the only one I can think of CONSIDERING (though your statement is not true of them) is England.

      5. There is a difference in value of the raw materials and the finished goods. Italy buys raw leather (hide) for a fraction of a cost, but then sells the same as a leather jacket for a lot more.

      Not sure what this is in reference to.. And in any case, who do Italy "buy" raw tomatoes off?

      A simple example that I can cite is of Homebrand Bakes Beans, this can used to be 0.33 cents when the Dollar was approximately 0.70 US and fuel was approximately 0.80-0.90. Now the same can is 0.70-0.90, the dollar is 0.90 (went through 1.20) and fuel 1.50+. What has changed?

      ... The short answer is "everything does, all the time, even as we write these asinine messages.". Inflation at a minimum is to be estimated to devalue your own cash at a rate of about 8-12% a year (depending where you live).

      Also you didn't "cite" anything - though it does make you sound like you're on Boston Legal. Definition as per google:

      1. refer to (a passage, book, or author) as evidence for or justification of an argument or statement, especially in a scholarly work.
      2. praise (someone, typically a member of the armed forces) in an official report for a courageous act.

      Perhaps you could but that story in an article or book and then cite your own works.

      The cost of eating fresh, compare that to eating unhealthy at one of the Fast Food joints, it is a no-brainer what is sustainable

      The only real comparison of the two is in that "healthy" AND fast food is generally less marketable, meaning to stay in operation they often have to charge more per item, among many other concerns i'm sure they face.. Cooking healthy at home is literally no more expensive than anything else.

      Last edited 09/02/14 7:42 pm

    If foreign governments are willing to subsidise particular industries- whether it's Italians with tomatoes or the Chinese with steel, which is another regular anti-dumping issue, should Australia just grin and take it and watch the local industries get destroyed? Do you think the prices stay down in the long run if there's no local tomato industry competing with the imports, no local steelmaker competing with the imports?

    Well, we basically have been allowing that to happen because the anti-dumping regime has been so weak, but at least it's starting to wake up.

    The government generally doesn't want stuff to cost more, because people get upset. They suddenly feel entitled to their cheap canned tomatoes, as you apparently do. But the idea is to also prevent job losses and industries being destroyed (well, it appears Abbott has no problem with that, but the government traditionally doesn't want that). You can't tax a destroyed business, and you have to pay unemployed people the dole.

      Raf, it's 2014 last I heard. You missed the anti-globalisation boat by several decades.
      The system works. Don't knock the system.

    I'm guessing this may then go for other fruit & veg and processed versions of?

    While I know that yeah, if we were to say to people 'look we're not importing fruit and veg anymore so you can only have most of this stuff for a few months of the year' we'd have riots in the streets (even though we can do an awful lot with glasshouses and hydroponics and such) I'm still not seeing how it can possibly be cheaper to ship garlic hundreds of km's by boat and truck to Australia than to truck it maybe 12 hours max from another state. (Plus you get fruit and veg that doesn't go rotten in a week and is actually fresh, not over-ripe.)

    The only way that could be possible is if the country it is coming from subsidizes growing industries enough that they can sell well below cost. (Although being fair, the per kg price of garlic is kind of misleading - the only people who buy more than a head of garlic at a time would be restaurants, and they're stingy with their garlic.)

      Yes, the major supermarkets buy so much and store it, there's a perpetual oversupply.
      They dump hundreds of tonnes each week.

      I agree that a return to consumption of local, seasonal produce should again be the new normal. The problem is, the economic imperative was placed before the common-sense and environmental ones.
      Business as usual.

        Doesn't have to be seasonal - like I said, we can do an awful lot with glasshouses and hydroponics. There's a lot of ways to fool plants into producing all year. (Hell, I just have a crappy backyard garden and I can still get oranges and tomatoes in winter provided we get 2-3 warmish days at some point.) You don't need genetic modification - just a way to keep the plant in ideal conditions for it to produce whatever the edible part it. (Leafy veg is even easier - most will produce regardless of weather, they just need enough water and nutrients to grow fast and to be protected from bugs.)

        And that's awful that they're dumping produce. There are people who can't afford fresh food. There are homeless people who I'm sure would have their day vastly improved by a free box of fruit to eat. We shouldn't be dumping food while there are people who can't afford to eat properly. (And yeah, fresh food should not be so expensive that people are reduced to eating 1 meal a day or can't afford it at all. Besides, if you sell more units does it really matter if the price is lower? Done right you still make the same amount of money.)

          Personally I just love it how everyone's an expert on economics, macroeconomics, tomato production and business of scale, and start throwing phrases like "the only way" around.

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