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

Photo: Getty
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Why Chris Grayling is Jeremy Corbyn's secret weapon

The housing crisis is Labour's best asset - and Chris Grayling is making it worse. 

It feels like the classic Conservative story: wait until the election is over, then cancel spending in areas that have the temerity to vote Labour. The electrification of rail routes from Cardiff to Swansea – scrapped. So too is the electrification of the Leeds to Manchester route – and of the Midland main line.

But Crossrail 2, which runs from north to south across London and deep into the capital's outer satellites, including that of Transport Secretary Chris Grayling, will go ahead as planned.

It would be grim but effective politics if the Conservatives were pouring money into the seats they won or lost narrowly. There are 25 seats that the Conservatives can take with a swing of 1 per cent from Labour to Tory, and 30 seats that they would lose with a swing of 1 per cent from Tory to Labour.

It wouldn’t be at all surprising if the Conservatives were making spending decisions with an eye on what you might call the frontline 55. But what they’re actually doing is taking money away from north-west marginal constituencies – and lavishing cash on increasingly Labour London. In doing that, they’re actually making their electoral headache worse.

How so? As I’ve written before, the biggest problem for the Conservatives in the long term is simply that not enough people are getting on the housing ladder. That is hurting them in two ways. The first is straightforward: economically-driven voters are not turning blue when they turn 30 because they are not either on or about to mount the first rungs of the housing ladder. More than half of 30-year-olds were mortgage-payers in 1992, when John Major won an unexpected Conservative majority, while under a third were in 2017, when Theresa May unexpectedly lost hers.

But it is also hurting them because culturally-driven voters are getting on the housing ladder, but by moving out of areas where Labour’s socially-concerned core vote congregates in great numbers, and into formerly safe or at least marginal Conservative seats. That effect has reached what might be its final, and for the Conservatives, deadly form in Brighton. All three of the Brighton constituencies – Hove, Brighton Kemptown and Brighton Pavilion – were Conservative-held in 1992. Now none of them are. In Pavilion they are third, and the smallest majority they have to overcome is 9,868, in Kemptown. The same effect helped reduce Amber Rudd’s majority in Hastings, also in East Sussex, to 346.

The bad news for the Conservatives is that the constituencies of Crawley, Reading, Swindon and in the longer-term, Bracknell, all look like Brightons in the making: although only Reading East fell to Labour this time, all saw swings bigger than the national average and all are seeing increasing migration by culturally-driven left-wing voters away from safe Labour seats. All are seeing what you might call “Hackneyfication”: commuters moving from inner city seats but taking their politics with them.

Add to that forced migration from inner London to seats like Iain Duncan Smith’s in Chingford – once a Conservative fortress, now a razor-thin marginal – and even before you add in the appeal of Jeremy Corbyn’s person and platform, the electoral picture for the Conservatives looks bleak.

(It should go without saying that voters are driven by both economics and culture. The binary I’ve used here is simplistic but helpful to understand the growing demographic pressures on the Conservatives.)

There is actually a solution here for the Tories. It’s both to build more housing but also to rebalance the British economy, because the housing crisis in London and the south is driven by the jobs and connectivity crisis in the rest of the United Kingdom.

Or, instead, they could have a number of measures designed to make London’s economy stride still further ahead of the rest, serviced by 5 per cent mortgages and growing numbers of commuter rail services to facilitate a growing volume of consumers from London’s satellite towns, all of which only increase the electoral pressures on their party. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.