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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Jeremy Corbyn appoints Shami Chakrabarti to lead inquiry into Labour and antisemitism

“Labour is an anti-racist party to its core," says leader.

Jeremy Corbyn has announced plans for an independent inquiry into antisemitism in the Labour party.

The review – led by Shami Chakrabarti, the former director of the human rights campaign group Liberty – will consult with the Jewish community and other minority groups, and report back within two months.

Its vice chair will be the director of the Pears Institute for the Study of Anti-semitism, Professor David Feldman.

The move follows a week in which the party suspended Bradford MP Naz Shah and former London mayor Ken Livingstone, amid claims that both had made antisemitic remarks.

But Corbyn told the Guardian: “Labour is an anti-racist party to its core and has a long and proud history of standing against racism, including antisemitism. I have campaigned against racism all my life and the Jewish community has been at the heart of the Labour party and progressive politics in Britain for more than 100 years.”

He added that he would not see the results of next Thursday's local elections as a reflection of his leadership, and insisted that he would not be held to arbitrary measures of success.

“I’m keeping going, I was elected with a very large mandate and I have a huge responsibility to the people who elected me to this position," he said.

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.