A poor defence

In the MTJ issue of 17 February, editor Ed Bedington’s Comment drew attention to the response from the British Retail Consortium (BRC) to the charge that retailers are exploiting their position to profiteer from raising the price of pork and pork products, while reducing the amount they pay to pig farmers

I understand the editor’s need to maintain a neutral stance on the issue and that the Comment needs to be balanced and restrained. However, the BRC’s response to the pig industry’s accusation that retailers are profiteering shows it to be little more than an apologist mouthpiece for those supermarket groups which continue to abuse their position of power in the supply chain.

MTJ’s front page news story in the same issue reports that the BRC’s spokesman, while conceding that pig farmers were in a less favourable position than other livestock farmers, accused them of “whingeing” at supermarkets. Then, with an arrogance that beggars belief, the spokesman suggested they should have thanked the supermarkets for the profit the industry made three years ago. If, by that, he means to imply that that is the only time in recent years the industry has been in profit — then I’m sad to say that he is correct.

In the past 10 years, the pig industry has enjoyed only one year of profitable operation — 2009. In every other year since 2002, there have been negative net margins for pig producers, as a result of production costs exceeding the 
price farmers were paid for their pigs.

During that period, we have seen a dramatic reduction in the size of the UK pig herd and what can be described as a mass exodus from the industry, as farmers simply quit. In a little over the past decade, the UK herd has almost halved and the number of producers in the country has declined by 25%. That is a shocking state of affairs, particularly at a time when sustainability in our food production systems has taken on such importance.

Now, let’s examine the rise and rise of the biggest supermarkets in recent years. If we look at the past 30 years we can see that the proportion of grocery spending attributed to the UK’s top three retailers has grown from 20% to more than 70%. Allowing for food price inflation, Tesco, Sainsbury’s and Asda have seen profits grow significantly – threefold for Sainsbury’s and Asda in that period, while since 1987, Tesco’s profits have multiplied nearly nine times. This suggests that there is something fundamentally flawed in the distribution of margins throughout the supply chain.

One of the strategies used by supermarkets to boost profitability is to increase their own-label ranges, which can be sourced at lower input prices. Unsurprisingly, data reveals that the category with the highest incidence of own-label is the meat, fish and poultry category.

The contraction of the pig industry, which I believe is a direct result of the abuse of power by supermarket groups, presents a serious dilemma for all those concerned about this country’s ability to ensure a sustainable agriculture industry, at a time of growing uncertainty over food supplies. This is an issue which transcends the so-called “whingeing” on the one hand and the pursuit of short-term profiteering on the other. Those in the supply chain who wield the most power must exercise the most responsibility. The use of power must surely always be accompanied by a moral choice and the longer-term interests of a sustainable model, rather than pursuing the corporate juggernaut of short-term maximising of profits.

The figures speak for themselves. For the BRC to hide behind the accusation of “whingeing” farmers is a facile argument that reflects the arrogance of power of the retailers it represents.

So let me leave the BRC with a word of advice. Defending the indefensible needs a more adroit approach. I can only suggest that
the BRC either refrains from commenting on the situation, for fear of further exposing its own inadequacies, or arranges a quick-fix lesson in how to represent its members without embarrassing them or leaving itself open to 
further ridicule. 

There is, of course, a much more pressing reason for a meaningful approach — the probable disruption to supply likely to occur as a result of the sow stall partial ban, due to come into effect throughout the EU on 1 January 2013.

Already, we are starting to see a tightening of supply and the sensible way forward is for retailers to enter into meaningful, long-term supply arrangements that can ensure both their supply of quality-assured product and an equitable distribution of margin for all partners in the supply chain. It’s a route that Bpex, the NPA and other representative bodies have long proposed as a means of ensuring a sustainable future for our industry. The need has never been more pressing or more obvious.