Horsemeat scandal: it's all in the supply chains

You reap what you sow.

Up until very recently, most of us would have confidently asserted that we had never eaten horsemeat in our lives. Today, our responses would likely be more hesitant as we think back over the various processed products we have consumed. In many ways, this is the very essence of the current crisis: the adulteration of meat has left us highly uncertain about what we are consuming; if products contain extraneous horsemeat what else might be hiding within?

This erosion of confidence and trust has serious implications for both the retail and food processing industries. Consumers have already reacted swiftly, ditching brands and products tainted by the scandal, with many rediscovering the local butchers they once abandoned in favour of the big supermarket chains. As new developments come to light, we should expect to see habits change still further.

Retailers will be thankful for the fact that the crisis is now of such scope and scale that blame has been dispersed over a wide area with no one in particular in the crosshairs. However, we should not allow the diffused nature of the situation to become an excuse for doing nothing. Indeed, the truth is that while the modern food supply chain might be complex and intricate, the roots of the matter are fairly self evident.

Despite being concentrated into the hands of relatively few players, food retailing in most western nations, and especially in the UK, remains highly competitive. In recent years this has intensified for two main reasons. Firstly, commodity inflation allied with the downturn has made the consumer far more price sensitive and has opened up a new battleground focusing on value. Secondly, following massive space expansion over recent years the market is now fairly saturated; with little organic growth this has resulted in each player trying to grab share from its neighbour while at the same time defending its own. Ultimately, both of these dynamics have resulted in a relentless focus on driving down prices to create competitive advantage.

Modern consumers have been beneficiaries of this focus; food bills today are much lower than they were 50 years ago. So, lower prices per se are not necessarily a bad thing. What is critical, however, is how those low prices are attained. When they arise from improved efficiency or scientific advances then the overall impact is generally a positive one. When they arise from exerting too much pressure on suppliers or from reducing checking and transparency then the impact can be catastrophically negative.

In the early days of reducing prices retailers tended to make savings from efficiency gains but now most of these have been extracted eking out further savings can really only come from one place: cutting corners. The pressure to trim every possible cost is enormous and the whole supply chain from farm to fork is now so tight that it was probably only a matter of time before a crisis arose. In other words, this is more than an accident; it is a direct consequence of the behaviours within the industry.

As the final link in the supply chain, retailers must bear the responsibility for what is sold. However, there is arguably another actor who is also liable: the consumer. Buying food is not discretionary; it’s something we all need to do, and do regularly. As such, it accounts for a very large proportion (around 45 per cent) of all that we spend on retail. If we can reduce the amount we spend during our weekly grocery shop then we have more scope to buy other more exciting consumer goods; so, we happily laden up our trolleys with value ready meals and cheap cuts of meat in order than we can shave a bit off our bill. How many of us, though, really thought about that 99p ready meal and asked “is this really too good to be true?” The answer is not nearly enough of us.

None of this is to excuse retailers or manufactures, but it does open up an important question about the current realism in terms of economics within the food industry. Part of solving this matter and guaranteeing, as far as possible, food which is free from contaminants has to be the acceptance of higher prices. Notably, when we talk about higher prices we are not talking about massive hikes but a few pence here and there. Certainly, that’s unwelcome in the current economic environment but it is a necessary price to pay.

Will consumers wear it? Their reaction to horsemeat suggests that they probably will. The fact that many are already buying more expensive foods or using butchers which charge a little more suggests there has been a subtle shift in attitude. Will retailers wear it? Arguably they should; being the cheapest at all costs may well bring some short term market share gains, but if it ultimately undermines long term confidence in the brand it becomes something of an own goal.

The bottom line is that when it comes to food prices the old farming adage is as true now as it ever was: you reap what you sow.

Photograph: Getty Images

 Managing Director of Conlumino

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How tribunal fees silenced low-paid workers: “it was more than I earned in a month”

The government was forced to scrap them after losing a Supreme Court case.

How much of a barrier were employment tribunal fees to low-paid workers? Ask Elaine Janes. “Bringing up six children, I didn’t have £20 spare. Every penny was spent on my children – £250 to me would have been a lot of money. My priorities would have been keeping a roof over my head.”

That fee – £250 – is what the government has been charging a woman who wants to challenge their employer, as Janes did, to pay them the same as men of a similar skills category. As for the £950 to pay for the actual hearing? “That’s probably more than I earned a month.”

Janes did go to a tribunal, but only because she was supported by Unison, her trade union. She has won her claim, although the final compensation is still being worked out. But it’s not just about the money. “It’s about justice, really,” she says. “I think everybody should be paid equally. I don’t see why a man who is doing the equivalent job to what I was doing should earn two to three times more than I was.” She believes that by setting a fee of £950, the government “wouldn’t have even begun to understand” how much it disempowered low-paid workers.

She has a point. The Taylor Review on working practices noted the sharp decline in tribunal cases after fees were introduced in 2013, and that the claimant could pay £1,200 upfront in fees, only to have their case dismissed on a technical point of their employment status. “We believe that this is unfair,” the report said. It added: "There can be no doubt that the introduction of fees has resulted in a significant reduction in the number of cases brought."

Now, the government has been forced to concede. On Wednesday, the Supreme Court ruled in favour of Unison’s argument that the government acted unlawfully in introducing the fees. The judges said fees were set so high, they had “a deterrent effect upon discrimination claims” and put off more genuine cases than the flimsy claims the government was trying to deter.

Shortly after the judgement, the Ministry of Justice said it would stop charging employment tribunal fees immediately and refund those who had paid. This bill could amount to £27m, according to Unison estimates. 

As for Janes, she hopes low-paid workers will feel more confident to challenge unfair work practices. “For people in the future it is good news,” she says. “It gives everybody the chance to make that claim.” 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.