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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Theresa May can play big fish with devolved nations - in the EU she's already a nobody

The PM may have more time for domestic meetings in future. 

Theresa May is sitting down with representatives from Scotland, Northern Ireland and Wales on Monday to hear their concerns about Brexit. 

For the devolved nations, it is the first chance since the seismic vote in June to sit down at a table and talk to the Prime Minister together. 

May has reportedly offered them a "direct line" to Brexit secretary David Davis. It must be a nice change for her to be the big fish in the small pond, rather than the small fish in the big pond that everyone's already sick of. 

Because, when it comes to the EU, the roles of Westminster and other nations is reversed. 

Brexit was small potatoes on the menu of Theresa May’s first European Council summit. It may hurt British pride but the other 27 heads of state and government had far more pressing issues on their plate to worry about.

So, it was an awkward debut Council evening meal of lamb and figs for Prime Minister Theresa May and dinner was served with a large reality check.

As May was later asked at her press conference, why would anyone listen to someone who already has one foot out the door?

Britain is in limbo until it triggers article 50, the legal process taking it out of the EU. Until that happens, it will be largely and politiely ignored.

May’s moment to shine didn’t come until 1am. She spoke on Brexit for “five minutes maximum” and said “nothing revolutionary”, EU sources briefed later.

May basically did that break-up talk. The one where someone says they are leaving but “we can still be friends”. The one where you get a divorce but refuse to leave the house. 

It was greeted in the way such moments often are – with stony silence. Brexit won’t be seriously discussed until article 50 is triggered, and then the negotiations will be overseen by the European Commission, not the member states.

As became rapidly clear after the vote to leave and in sharp contrast to the UK government, the EU-27 was coordinated and prepared in its response to Brexit. That unity, as yet, shows no sign of cracking.

German Chancellor Angela Merkel later damned May with faint praise. She hadn’t said anything new but it was nice to hear it in person, she told reporters.

Merkel, as she often does, had a successful summit. She needed Council conclusions on migration that would reassure her skittish voters that the doors to Germany are no longer thrown wide open to migrants. Germany is one of the member states to have temporarily reintroduced border checks in the passport-free Schengen zone

The conclusions said that part of returning to Schengen as normal was “adjusting the temporary border controls to reflect the current needs”.

This code allows Merkel and her Danish allies to claim victory back home, while allowing Slovakia, which holds the rotating Presidency of the EU, enough of an excuse to insist it has not overseen the effective end of Schengen.

But Merkel’s migration worries did not provide hope for the British push for immigration controls with access to the single market. The Chancellor, and EU chiefs, have consistently said single market access is conditional on the free movement of people. So far this is a red line.

Everyone had discussed the EU’s latest responses to the migration crisis at a summit in Bratislava. Everyone apart from May. She was not invited to the post-Brexit meeting of the EU-27.

She tried to set down a marker, telling her counterparts that the UK wouldn’t just rubberstamp everything the EU-27 cooked up.

This was greeted with a polite, friendly silence. The EU-27 will continue to meet without Britain.

Francois Hollande told reporters that if May wanted a hard Brexit, she should expect hard negotiations.

Just the day before Alain Juppe, his likely rival in next year’s presidential election, had called for the UK border to be moved from Calais to Kent.

Hollande had to respond in kind and the Brussels summit gave him the handy platform to do so. But once inside the inner sanctum of the Justus Lipsius building, it was Syria he cared about. He’s enjoyed far more foreign than domestic policy success.

May had called for a “unified European response” to the Russian bombing of Aleppo. It was a break in style from David Cameron, who is not fondly remembered in Brussels for his habit of boasting to the news cameras he was ready to fight all night for Britain and striding purposefully into the European Council. 

Once safely behind closed doors, he would be far more conciliatory, before later claiming another triumph over the Eurocrats at a pumped-up press conference.

May could point to Council conclusions saying that all measures, including sanctions, were on the table if the Russian outrages continue. But her victory over countries such as Italy and Greece was only achieved thanks to support from France and Germany. 

The national success was also somewhat undermined by the news Russian warships were in the Channel, and that the Brexit talks might be in French.

But even warships couldn’t stop the British being upstaged by the Belgian French-speaking region of Wallonia. Its parliament had wielded an effective veto on Ceta, the EU-Canada trade deal.

Everyone had skin in this game. All the leaders, including May, had backed CETA, arguing the removal of almost all custom duties would boost trade the economy. Belgium’s Prime Minister Charles Michel was forced to tell exasperated leaders he could not force one of Belgium’s seven parliaments to back CETA, or stop it wrecking seven years of painstaking work.

As the news broke that Canada’s trade minister Chrystia Freeland had burst into tears as she declared the deal dead, everyone – not the first time during the summit – completely forgot about Britain and its referendum.

Even as the British PM may be enjoying a power trip in her own domestic union of nations, on the international stage, she is increasingly becoming irrelevant. 

James Crisp is the news editor at EurActiv, an online EU news service.