Apologies to supermarkets on one score: they no longer have large profit margins

During Fairtrade Fortnight, MP Sue Hayman wrote highlighting unfair trading behaviour that still blights the food sector and outlining Labour’s work on the Agriculture Bill to tackle this more effectively than the government is willing to consider. More of this in the post below.

Her assertion that the grocery business runs on tight margins – considerably less than processors/food manufacturers – was a shock to the writer

When the totally unsuccessful Fair Deal campaign was at its height – in 2002 – reliable figures for supermarket profit margins could not be found by the writer. One unsourced allegation put the highest at 15% and that impression was retained.

Over the years this has led to repeated calls for margins to be reduced in order to pay food producers a fair farmgate price covering costs of production and overheads.

Sue Hayman’s remarks prompted the writer to renew her search and this time solid evidence emerged

The story of how the first Aldi store (above, in Stechford) ‘hit’ British supermarket giants in 1990 was told in the Guardian’s business section, revealing that – at the time – their 7% profit margins were the world’s highest.

DEFRA’s archives recorded that profit margins of the main supermarkets ranged between 2% and 6 % in 2004/5. Processors fared much better: “According to The Grocer 150 Index for 2005, the average profit margin of UK food and drink manufacturers was 8%, with the three largest companies (Cadbury Schweppes, ABF and Tate & Lyle) averaging 12%”.

In 2015, the Telegraph recorded that industry-watchers wondered if Tesco could maintain its treasured 5.2% margin when the discounters Aldi and Lidl were growing market share at a record pace. In the event, Tesco ended up actually losing money in the UK in the six months to the end of February. Mike Dennis, at Cantor Fitzgerald, believed that Tesco’s trading margin had fallen to 0.5%, compared with more than 5% at Aldi.

And Business Insider quoted the conclusions of Professor Heiner Evanschitzky, Professor and Chair of Marketing at Aston Business School:

”Supermarkets have to get used to this ‘new normal’ of low profit margins and must adapt accordingly. The discount retailers like Aldi and Lidl have fundamentally disrupted the market and the Big Four – Tesco, Morrisons, Asda and Sainsbury’s – must accept their losing market share”.

 

 

 

 

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Muller offers 2011 prices: farmers pay 2018 input costs

“Blow for Shropshire farmers as Müller cuts the December milk price”: The Müller Direct standard litre price from December 1 will be 28.5ppl, down one pence per litre. These milk prices are similar to those over 6 years ago – see the chart of Farmgate Milk Prices (left) which can be downloaded from the AHDB website

Agricultural input costs rose by almost 5% in the year to September, with fuel prices increasing the most, according to the AF Group’s AgInflation Index: All product areas recorded in the index rose in price:

• fuel up 11.5%,
• fertiliser up 8.7%,
• and contract and hire costs rising by 8.5%.

Ian Potter’s forecast: “During the next day or two it’s a near certainty a heap of milk purchasers, particularly those in the liquid middle ground area, will follow Muller with 1st December price cuts and you wouldn’t rule out the odd cheeky and desperate milk buyer even cutting producer prices from 1st November which would cause a stir!!”

The Telegraph’s 2012 advice, “give a fair price for a farmer’s milk” is even more relevant today – extracts:

If things continue as they are, traditional dairy farms will disappear from Britain and it is the relentless cost-cutting by some of the big supermarket chains that is responsible for driving dairy farmers out of business.

Some supermarkets – Tesco, Marks & Spencer, Sainsbury’s and Waitrose – have agreed contracts with dairy farmers that allow them at least to recover the costs involved in producing milk. But those contracts cover only a small minority of British dairy farms, and even they do not leave farmers with any real profit.

Other supermarkets actually pay less for milk than it costs to produce. Sixteen years ago, according to the association, retailers made an average of 2.6p profit per litre. Now, they make nearly six times that amount. Even allowing for inflation, this is a serious jump in profit, and one which could surely be moderated without threatening the success of the supermarkets.

The Royal Association of British Dairy Farmers insists that all supermarkets could pay dairy farmers a price for milk that would meet the cost of production without increasing the price charged to the consumer: all they would need to do is to accept a slightly lower profit on the milk they sell.

 

 

 

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Financial pillaging of rural Britain to boost corporate profits: NI farmers to take their case to Stormont

Top post on this site last week – and last month – was FFA’s reflection on Brexit – the farming facts from Northern Ireland (June 2016). Because of readers’ interest, the writer, William Taylor, Northern Ireland co-ordinator of Farmers for Action (right), was asked to update the article which is published below in full.

The EU was conceived in the 50’s after the terrible events of the Second World War by a Mr Monet, a Mr Schumann and others. It was modelled on the United States of America and had as its goal for Europe as the two PP’s, peace and prosperity. It has by and large been quite successful at delivering the peace including Northern Ireland.

All prospered until the 1980s when the large food corporate retailers, the large food corporate wholesalers, to a lesser extent the large corporate food processors and the large co-operative food processors, who behave like corporates, began to take over.

They influenced the EU ship in the wheelhouse, persuading them to talk the talk but letting the corporates walk the walk, increasingly in their interest.

In short, the hard-working family farms and rural businesses of rural Europe were and are being short changed in what they should expect from the Treaty of Rome, the Lisbon Treaty, the Maastricht Treaty, the Human Rights Laws and all the other EU promises to the people.

Article 39b of the Lisbon Treaty states that rural dwellers are to be properly rewarded for their work but this pledge has not been delivered.

Today, 50% (ie peace) of what goes on in the EU is good, the other 50% is now corporate corrupt at the top (ie the missing prosperity for rural dwellers).

Then we come to Westminster, where we have seen the actions of successive UK governments since the 1980s.

As the corporate corrupt EU prosperity machine started financially milking farmers and rural dwellers, so did Westminster, again due to increasing food-corporate influence, including the bankers, to which even Blair’s New Labour became easily addicted, although change may be afoot.

If proof were needed of this new 21^st century UK politics pillaging rural UK financially for the sake of food corporates’ profits, then look no further than the 2015 verdict by the Supermarket Ombudsman against Tesco. A few days after this, Vince Cable (Lib Dem MP in the last Coalition Government) was interviewed by the BBC and asked what he thought of the outcome; he summed it up by saying, ‘when we were in Coalition we pushed hard for the Supermarket Ombudsman’s office to have increased powers but also the ability to fine the large supermarkets but the Tories wouldn’t hear tell of it – if the ability for the Supermarket Ombudsman to fine had been in place, Tesco would have been fined up to £400million.’

I ask you what chance does a family farm have of getting a fair price for their produce against the financial might and influence of these food corporates both in Westminster and Brussels?

Therefore, the case for legislation on farmgate prices has been worked on for over two years in Northern Ireland and is shortly to be put to Stormont (as soon as it returns to office). If successful it would return farmers a minimum of the cost of production plus a margin inflation linked across the staples.

 

 

 

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Divide and rule: lamb producers protest, following milk producers – who next?

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As Chinese feed producers combine to get a fair price and reduce imports, sheep farmers here protested against Tesco’s promotion of low cost New Zealand lamb during prime British lambing season outside its stand at the Royal Welsh Show last week.

 

 

Around 60 farmers held placards saying, “New Zealand isn’t Welsh” and “Welsh lamb is in season. Where is Tesco’s backing?”

“Using pity doesn’t strike us as the best way to motivate British consumers to ditch free range grass fed New Zealand lamb for British lamb,” said Rick Powdrell, Australia’s Federated Farmers Meat & Fibre chairperson.

NFU livestock board chairman Charles Sercombe said: “Livestock farmers here and across the country are angry, disappointed and frustrated at the way some retailers are continuing to promote an end-of-season product, which many view as inferior, over Red Tractor-assured, fresh lamb produced in the fields, valleys and hills of England and Wales”. New Zealand lamb is currently at the end of its season, while British lamb is at its peak.

Mr Sercombe added that this retailer is failing to live up to the commitments made by their outgoing chief executive Philip Clarke at the NFU Conference last year that Tesco should be the best supporter of British farmers and that it wished to shorten the supply chain.

Unless British food producers combine across all sectors, they will continue to connive at their own exploitation.

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FFA: Tesco has some way to go before reaching the European Milk Board accountancy cost of milk production of 41p/l

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Before Christine Tacon is fully in post and able to receive reports, Farmers For Action have lodged a complaint with Advertising Standards Authorities about a Tesco advertisement ‘shoring up’ the horse meat scandal.

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FFA are not going to allow Tesco to consistently mislead UK consumers, UK farmers’ customers, into believing that:

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a)     All Tesco milk is from dedicated farmer suppliers.

b)    Tesco are paying UK dairy farmers a fair price.

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In the advertisement Tesco state that they make sure their dairy farmers ‘always get paid above the market price for their milk’.

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William Taylor, FFA UK NI co-ordinator, states that “Tesco cannot get away with misleading consumers – our customers – that they are paying a fair price to UK dairy farmers who supply them through Tesco supplying processors.

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• Firstly only a miniscule portion of dairy farmers – approx less than 5% of Tesco supply – receive extra money for milk destined to Tesco, but have to jump through increasing numbers of price pressure hurdles to get it, leaving many to question if indeed there is any monetary benefit.”

 

• “Secondly, this deliberate Tesco bluff appears to give the impression that all the UK dairy farmers supplying Tesco milk are paid above the market price, presenting the impression of a fair retailer which couldn’t be further from the truth.

 

• We are led to believe Tesco are currently paying 31.82p/l to approx less than 5% of dairy farmers they call dedicated liquid milk suppliers supplying via Tesco contracted processors, however when the overall average cost to Tesco for liquid milk is calculated it would mean Tesco needing to pay an approx additional 40% to the other 95% of its UK dairy farmer indirect suppliers plus an additional 30% to the 5% current dedicated suppliers to reach the European Milk Board accountancy cost of milk production of 41p/l, never mind anything for profit.”

 

Based on press release:

 

William Taylor,56 Cashel Road, Macosquin, Coleraine, Co L’derry, N Ireland, BT51 4NU

Tel/Fax  028 703 43419  Email  taylor.w@btconnect.com

Food producers, get ready to offer Tesco valuable online insights

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At a challenging time for Tesco with its recent results showing a fall in group trading profits by 10.5%, Philip Clarke, its UK chief executive, announced its new online community for producers, growers and farmers, which will help support the fresh produce industry through the recession.

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Speaking at the IGD Convention in London, Clarke said that supermarkets need to get “more personal with growers and suppliers”:

“Our online community’s blogs and discussion forums provide us with an invaluable insight into our supply chain; I want to make Tesco much more transparent and accessible to our suppliers in the digital age”

He ended: “Retail is about selling things to other people; personal relationships matter to us whether it’s the farmer to the food manufacturer or the shopkeeper to the customer.”

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Read more in the Fresh Produce Journal: http://www.freshinfo.com/index.php?ei=h&fiemt=10012012101372463110&s=n&ss=nd&sid=56313

 

Bramley apple growers hit now

 

Bring on the adjudicator!

 

In recent months a number of growers in the south-east region have expressed their concern about the future of growing Bramley apples.

A survey covering 18 farms indicates that approximately 460 acres have been grubbed during the past year, with only 55 acres of new planting.

Too many Bramleys are discarded as ‘gradeouts’ and current selling prices are too low to obtain a profitable margin. 

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Supermarket price wars

 

Bramley apples are now part of the price wars which have appeared to devalue Birtish milk and cheese. Asda has reduced the price of Bramleys to £1/kg and Tesco is selling them at £1.05/kg. 

Adrian Barlow, chief executive of the trade association English Apples and Pears, points out that there is no alternative for Bramleys, so if the price was 5p per kg higher, the housewife would still purchase the same quantity. 

 

The FPJ reports: 

 

“In the parish of Marden, which was the heartland of Bramley production for years, three growers have grubbed their orchards and a fourth has reduced theirs by 20 acres. 

“The situation has become more urgent with the news last week that a supermarket price war seems to have broken out on Bramley apples. Asda has reduced its price to £1/kg and Tesco is selling them at £1.05/kg. 

“With EAP figures showing stocks of category I Bramleys running at 3,000 tonnes less than in January 2011, supplies are likely to run out prior to this year’s harvest. 

“Unlike dessert varieties, there is no competition for Bramleys on the shelf and if housewives decide to use the product, price is not the deciding factor. 

“If supermarkets wish to support the Bramley sector, they need to address the problem now, which would provide confidence for growers to re-plant the lost acreage in order to provide the volume required for a 12-month supply.

 

The picture is from the site of the English Apple Man: http://www.theenglishappleman.com/

 

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