A Little Lesson for British Retailers

by 5m Editor
9 June 2008, at 11:30am

UK - To take the tension out of the pigmeat supply chain, British producers need meaningful back-to-back contracts between producers, retailers, and their supplying processors, NPA and BPEX chairman Stewart Houston told European Pig Producers’ congress.

“I cannot speak for every producer, but as family, we want to be proud to see happy customers moving our product off the retailers’ shelves having left everyone in the supply chain with a fair margin,“ he told an audience of producers, processors and retailers at Norwich.

"I think most producers now are equally focused on risk, and not fundamentally on price as we used to be. It is supply chains that put meat on the table, not individual businesses."
NPA and BPEX chairman Stewart Houston

“I think most producers now are equally focused on risk, and not fundamentally on price as we used to be. It is supply chains that put meat on the table, not individual businesses.“

Toyota and Honda worked in an environment that was as competitive as supermarket retailing and they had taken Europe by storm… “not because they’ve got great cars, but through superb supply chain co-ordination and communication“.

They had achieved this with great leadership and communication and — importantly — through supply chain trust.

“Loyalty in the Toyota chain is not about fear or pressure, it’s about sharing the benefits and problems in the chain. It’s all down to trust and communication, understanding responsibilities in the chain and a clear sharing of the benefits of supply chain efficiency.“

British pig producers were never going to achieve the right efficiency levels if they did not have the confidence in the medium term to invest, he said. “Our top third of producers are still only comparable to the average in countries which export to us.“

Whilst producers had built a better relationship and understanding with both processors and retailers, there was still a disconnect, he told congress.

Nowhere was this better exemplified than in the current price:cost crisis, where recognition of the increase in producers’ costs had been slow, and the lack of an adequate price for pigs had put businesses under extreme financial pressure.

There was a lack of trust, said Stewart Houston. “Each party thinks the other will run if there is a chance to make another penny… a view borne out by history, and producers are as much to blame as anyone.“

There was intense competition between retailers fighting for volume and using the cheapest price to achieve it, he said. Time and energy devoted to finding overseas production would more productively be spent securing supply chains with British producers.

“Processors have to bid on price every month for huge volumes of pigmeat. The obvious effect is downward price pressure which ends up with the producer. Importantly though, it reduces efficiency and investment in the processing sector.“

In his address Stewart Houston made particular mention of meat:fat levels. “We need to be talking about payment for lean meat and not lack of fat, which to my mind is one of the factors that dropped our production levels.“

And he signaled possible new outlets for British pork given the current strength of the euro against sterling.

“At present we are dependant on our home market… quite different to say Holland and Denmark, where they are far more export facing.

“It may be that we are too focused on the home market. Certainly the value of the pound versus the euro might mean that we can put more energy into exports… but we’ll only use them to add value.“

5m Editor