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 the shadow cabinet forced Jeremy Corbyn not to change Labour policy on Syria air strikes

Frontbenchers made it clear that they "would not leave the room" until the leader backed down. 

Jeremy Corbyn had been forced to back down once before the start of today's shadow cabinet meeting on Syria, offering Labour MPs a free vote on air strikes against Isis. By the end of the two-hour gathering, he had backed down twice.

At the start of the meeting, Corbyn's office briefed the Guardian that while he would hold a free vote, party policy would be changed to oppose military action, an attempt to claim partial victory. But shadow cabinet members, led by Andy Burnham, argued that this was "unacceptable" and an attempt to divide MPs from members. Burnham, who is not persuaded by the case for air strikes, warned that colleagues who voted against the party's proposed position would become targets for abuse, undermining the principle of a free vote.

Jon Ashworth, the shadow minister without portfolio and NEC member, said that Labour's policy remained the motion passed by this year's conference, which was open to competing interpretations (though most believe the tests it set for military action have been met). Party policy could not be changed without going through a similarly formal process, he argued. In advance of the meeting, Labour released a poll of members (based on an "initial sample" of 1,900) showing that 75 per cent opposed intervention (though it is reported that just 100 emails were checked).

When Corbyn's team suggested that the issue be resolved after the meeting, members made it clear that they "would not leave the room" until the Labour leader had backed down. By the end, only Corbyn allies Diane Abbot and Jon Trickett argued that party policy should be changed to oppose military action. John McDonnell, who has long argued for a free vote, took a more "conciliatory" approach, I'm told. It was when Hilary Benn said that he would be prepared to speak from the backbenches in the Syria debate, in order to avoid opposing party policy, that Corbyn realised he would have to give way. The Labour leader and the shadow foreign secretary will now advocate opposing positions from the frontbench when MPs meet, with Corbyn opening and Benn closing. 

The meeting had begun with members, including some who reject military action, complaining about the "discorteous" and "deplorable" manner in which the issue had been handled. As I reported last week, there was outrage when Corbyn wrote to MPs opposing air strikes without first informing the shadow cabinet. There was anger today when, at 2:07pm, seven minutes after the meeting began, some members received an update from the Guardian revealing that a free vote would be held but that party policy would be changed to oppose military action. This "farcical moment", in the words of one present (Corbyn is said to have been unaware of the briefing), only hardened shadow cabinet members' resolve to force their leader to back down - and he did. 

In a statement released following the meeting, a Corbyn spokesperson confirmed that a free vote would be held but made no reference to party policy: 

"Today's Shadow Cabinet agreed to back Jeremy Corbyn's recommendation of a free vote on the Government's proposal to authorise UK bombing in Syria.   

"The Shadow Cabinet decided to support the call for David Cameron to step back from the rush to war and hold a full two day debate in the House of Commons on such a crucial national decision.  

"Shadow Cabinet members agreed to call David Cameron to account on the unanswered questions raised by his case for bombing: including how it would accelerate a negotiated settlement of the Syrian civil war; what ground troops would take territory evacuated by ISIS; military co-ordination and strategy; the refugee crisis and the imperative to cut-off of supplies to ISIS."

George Eaton is political editor of the New Statesman.