Heading to Holborn in a Handcart


By Jane Brooks


Although widely billed as good for consumers Sainsbury’s proposed merger with Asda should be sending shock waves through the supply chain.


Last year’s Tesco-Booker tie up was bad enough, but the retail juggernaut that could be spawned by the legal unification of the UK’s second and third largest retailers reinforces the already urgent need to address an acute lack of fairness in grocery supply chains. Particularly in view of Sainsbury’s chief executive Mike “We’re


in the money” Coupe’s pledge to cut prices on everyday products by around 10% after the deal. The merger has yet to be ratified by the Monopolies Commission and a ruling is expected from the Competition and Markets Authority (CMA) later this year. However the £15 billion mega deal could lead to 2,800 stores and


some £50 billion in revenue combining, a move that will topple Tesco from their number one spot. The three retailers already have a 60% market share but the proposed merger will put a single supermarket group in charge of around a third of the UK’s food supplies, something that the National Farmers Union (NFU) has warned about. Director General of the NFU, Terry Jones confirmed that the NFU


has officially registered its interest with the Competition and Markets Authority and in a letter to the CMA he stated “Farmers and growers form the foundations of grocery supply chains – providing the British public with safe, traceable and affordable food for all incomes. “The consolidation of retail buying power has been of great


concern to our members for many years. If buyers working for this enlarged business abuse its market power … ultimately this will impact on choice and availability for shoppers.” However the entire supply chain is already under immense


pressure from retailers, with many suppliers barely covering their production costs. Added into the mix is also general uncertainty over post Brexit subsidies and a seemingly total lack of any form of coherent post Brexit agricultural policy to support UK food production. Supermarkets are relentless in their pursuit of cheap food,


buoyed up by the success of relative newcomers to the market such as Lidl and Aldi, voracious discounters that have historically offered smaller ranges of commodity type products and private label goods, undercutting the big brands. This has already led to ever decreasing prices as consumers demand increasingly cheaper food and drive down supermarket prices. It really has turned into a race to the bottom and is of no benefit


to either the retailer or consumer, particularly as the rest of the world is voraciously eyeing up the post Brexit British food market.


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There is a real danger that UK production standards will not be


adhered to by importers, particularly if powerful supermarkets are allowed to dictate import regulations, and foodstuffs that do not meet equivalent regulatory production values to those already practised here in the UK are allowed onto the supermarket shelves. As the supermarkets drive down price it is beginning to look highly


likely that cheaply produced imports of food will trigger a drop to the bottom in terms of quality, and there is a very strong possibility that British produced food could become a niche product, aimed at the Waitrose type customer, if you will. This will be aided and abetted by the farcical situation of


a toothless groceries adjudicator only able to check that direct suppliers don’t breach the Groceries Code of Practice and being completely powerless to protect the majority of farmers, our primary food producers. UK supermarkets with a turnover of more than £1 billion must


comply with the Code of Practice. Groceries are covered, but not products such as petrol, clothing, plants & flowers. Because the Code only covers direct suppliers and not indirect


suppliers many supply chain problems are not being solved, just pushed out of the Code, so unless they supply direct to the supermarkets farmers have very little protection against unfair trading practices and consequently less and less of the price consumers pay in the shops is reaching those who need it. That really needs to change.


Currently around 85% of milling wheat is sourced here in the UK


and is supplied under a stringent system of testing and verification, the same applies to imported wheat. Additionally animal feedstuffs also have to reach similar standards, not only to comply with assurance schemes but also to give consumers confidence that all the steps within the supply chain are properly monitored and regulated. Farmers across the board are already struggling to make a profit


and new international trade deals may undercut their costs. There is a real danger that ‘food UK’ could be outsourced, with a wholesale loss of agricultural production here in the UK. The impact this will have on allied trades is immense, not least within the milling and feed compounding industry. The economies of farming in the UK are coming under ever


increasing scrutiny, as are welfare standards and the environment; arable farming in particular is facing huge regulatory changes to crop protection methods. However, at the heart of the problem is the consumer, and


somehow the information about food origin and production methods are still not reaching them. Generally, buying decisions are completely driven by price and here in the UK a high welfare system is never going to be able to compete against lower priced imports that do not meet the same welfare and environmental standards. It could end up being a case of having to protect the public from


themselves by introducing regulation to bring imported food standards in line with the UK or even to consider just how beneficial our existing standards are and possibly having a bonfire of the regulations.


Comment section is sponsored by Compound Feed Engineering Ltd www.cfegroup.com


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