Home World Economy Supermarket sourcing

Supermarket sourcing

1
0
SHARE
chicken tikka masalaImage copyright Getty Images
Image caption The ingredients from a simple ready meal may have come from all corners of the earth

When you pop your chicken tikka masala ready meal into the microwave at the end of a long day at work, you’re likely to be thinking how hungry you are rather than marvelling at the global trade deals that brought it about in the first place.

Yet the chicken, spices and rice in that box are in reality the result of a series of complex trading relationships.

The chicken may have come from Thailand, the pilau rice from India and the spices from elsewhere in Asia. Even the packaging is likely to have been sourced internationally, while the meal itself may well have been produced outside the UK.

The recent scandal at Waitrose, which was forced to rebrand the lamb ready meals in its “British” range because some are made with lamb from New Zealand, has highlighted the issue.

Image copyright Waitrose website
Image caption Waitrose has said all its “British” lamb meals will be rebranded as “Classic”

“When we go into a supermarket, restaurant or coffee shop, we’re at the very centre of a huge web of food and drink trading relationships, with layers and layers of exchanges going on out of sight,” says James Walton, chief economist at food and grocery research charity IGD.

All those deals add up to a significant industry. We import more than we export of all types of food. The UK imported a whopping £38.5bn worth of food, feed and drink in 2015, the most recent official statistics available.

The number dwarfs the £18bn worth of food we exported that year. In fact, just half of the food we eat in the UK originates here, with most of the rest imported from Europe.

A recent vegetable shortage, driven by bad weather in southern Europe, highlighted this dependence, and led to a flurry of pictures on social media of empty supermarket shelves.

On top of this, the pound’s 14% fall against the euro since the Brexit vote means imports cost more, and there is huge uncertainty over what effect leaving the EU will have on the cost and availability of food from Europe.

Image copyright Harry Wallop/Twitter

All of this begs the obvious question: shouldn’t supermarkets simply rely more on British suppliers instead?

Supermarkets are coy on just how much they source from the UK, with Morrisons the only one of the “Big Four” to answer my email on this question. Tesco, Asda and Sainsbury’s did not reply.

Morrisons, which says it already sources around two-thirds of its supplies from the UK, has pledged to recruit 200 more British suppliers after a report it commissioned found global uncertainties meant it “makes increasing sense to build up a stronger local food sector”.

The report’s author, Prof Tim Benton, said the aim of doing this “is not to disengage from reliance on global trade, but to hedge our bets by increasing local production for local consumption”.

Local is all the rage right now, with the popularity of farmers’ markets, homemade artisan breads and craft beers continuing apace. People expect food and drink that hasn’t travelled thousands of miles to taste better. The assumption is also that production standards will be higher.

People are also keen to support their local economy. In fact, three-quarters of people said they try to buy British food and drink if it is available, mainly with the motivation to support British manufacturers and jobs, according to IGD’s December survey of 1,700 shoppers. Although notably, a lot less – just under a third – said they were willing to pay more for the privilege.

Tesco was criticised last year for tapping into this trend, using fictional British-sounding farm names on labelling for a range of meat and fresh produce, some of which was sourced from abroad.

Image caption Rosedene Farms may sound British – but the strawberries are from Morocco

But while the notion of buying British may be appealing, the reality is that on a bigger scale it’s very difficult to achieve.

Even if we ate all the food we exported, we would still generate less than two-thirds of what we need, according to Prof Benton.

And while Morrisons has pledged to source more from the UK, the chain is in an unusual position in that it already owns an abattoir and meat-processing operations, as well as bakeries and produce-packing sites, making it easier for it to be more self-reliant.

For many of its rivals, replicating this kind of domestic supply chain would be much tougher.

Paul Martin, head of retail at consultancy KPMG, says often the economics just don’t stack up.

“On paper, it’s very appealing, but the challenge is that due to the high cost of manufacturing in the UK, you need to have a very high utilisation rate. If you are a supermarket then you’re likely only to supply to yourself,” he says.

The hurdles aren’t just financial. The UK doesn’t actually have enough room to grow all the crops and keep all the animals that we currently eat. The climate means there are also certain items, such as bananas, that we simply cannot grow at scale in the UK.

Given the massive housing shortage in the UK, Mr Martin says it’s unlikely to be desirable politically to use more land for farming.

Image copyright Getty Images
Image caption The UK could never produce enough wine to satisfy demand, says KPMG’s Paul Martin

And while supermarkets may talk of looking at alternative supply sources – something he notes is a good way of putting overseas suppliers under pressure to keep costs low – the reality is that the impact on consumers may also be unpalatable.

“If you suddenly say we’ll shift 30% or 40% of imported food categories, even if it was possible, it would have a significant shift on the way people consume goods,” says Mr Martin.

Lots of products, such as tomatoes and strawberries, which we take for granted as being available all year round, no longer would be. And, he says with a smile, the UK could never produce enough wine to satisfy demand.

The other problem is producing more home grown products in significantly more volume in an economy almost entirely reliant on the services economy would require a dramatic revolution that would take years.

“The evolution of our supply chain moving abroad took some years and moving it back would take a similar length of time. The reality is this is something that cannot be changed quickly, whether you’re talking about courgettes or cotton trousers,” says veteran retail analyst Richard Hyman.

While the rising costs of imports are expected to push the cost of our supermarket shop higher, Mr Hyman thinks the intensity of competition from discounters Lidl and Adli, and the ever-present threat of Amazon, means supermarkets will be willing to absorb much of these to protect their market share.

He believes for supermarkets this fierce war for customers is a far bigger priority than sourcing more food from the UK.

“This is the real challenge. A lot of questions go far, far deeper than a hut in a field in Lincolnshire. Would that it was that simple,” he says.

LEAVE A REPLY

Please enter your comment!
Please enter your name here