Increased simplification and integrity of supply chains is always possible; however, it comes at a price. This price is not just the financial implication but also the need to change consumer expectations, says Stephen Rigby, partner, and Steve Mortimer, associate director in the advisory team at Grant Thornton UK LLP.
Waste within supply chains is very high, with a large factor in this being consumer perceptions of what is ‘normal’ for the product. Consumers have cosmetic expectations, regardless of nutrition or taste implications and consistently show a preference for ‘conforming’ produce. This means that fresh produce such as ‘wonky’ carrots and ‘lumpy’ strawberries are wasted as the supermarkets look to sell uniform products only, generally adding to the cost implications.
Whilst high volume producers can often bear the cost, or find alternative markets willing to accept the irregular produce, UK local producers often don’t produce the volumes needed to be able to absorb such low usable yields from harvests, so do not have the same opportunities to supply European markets with the products not acceptable to the UK consumers.
To be able to continue, the price of the conforming produce would have to increase significantly. The question is would consumers rather pay for it or shift attitudes about what ‘normal’ is? For many, food is not simply a necessity, it is entertainment, an enhancer of social status, or part of a ritual. To change ingrained behaviours associated with eating and food is far from simple.
As a basic requirement of food supply, consumers should have the confidence that the supply chain is robust and transparent enough to ensure the ingredients on the label match what’s in the product. In the UK, current consumer demand means that in many cases it isn’t possible to deliver from within the UK in sufficient volumes.
Whether simplification of the supply chain is realistic depends completely on the food in question and how consumers want to purchase it. Some key issues include:
Proximity of supply – many products in the UK are locally sourced, but we can’t produce everything we need, and want, all year round. Therefore the supply chain inevitably has to break our shores, unless consumers are willing to only eat seasonal items. However, locally sourced products are frequently more expensive as the producers are often at the smaller end of the scale and cannot drive the same efficiency levels to operate a low margin, high volume model.
’Price point’ options – consumers have different price expectations and different values associated with those expectations. It is rare that producers try to address both ends of the value scale. Cheaper products invariably use a higher level of preservatives, frozen items and processed ingredients, often with a high water content, and products are engineered to have low quantities of more expensive ingredients, like proteins. Producers will normally operate on a high volume, low margin basis. More expensive products are differentiated on criteria such as freshness, conditions of growing or rearing, and breed of animal. Producers will normally operate a lower volume, higher margin approach.
Buyer and producer risks – farmers are often less keen on dealing directly with the large supermarkets as their business might be over dependent on a single customer. Intermediaries with multiple customers protect smaller producers from over reliance and also help with multiple infrastructures and processes to be able to meet the supermarket demands. Equally, buyers seek more than one supplier to protect against poor yields, crop failure and extreme conditions.
As a result of the above and other considerations, the supply chain has become stratified as each entity concentrates on its own process getting the product from fields/farms to fork. Simplifying it would require some vertical and horizontal integration, creating bigger suppliers with, potentially, much less consumer choice. There would also be cost implications for supermarkets as they would be required to assure production from many more farms and artisan processors; currently this is left to the intermediaries.
How do we get that supply chain security? Is it having production in our back yard or is it having a supply chain that has built up trust, is transparent and subject to a greater level of policing and testing?
Local production is valuable, important for our industry, our heritage and our economy – the more the better. However, consumers drive the market, tastes have diversified, availability of all items is expected year round so local supply in the UK, unless consumer habits change drastically (with education around seasonality and what ‘normal’ is when it comes to fresh produce), is never going to match demand across the board.
In the absence of a significant shift in consumer behaviour, we must recognise that food is a global business in a global market, which brings challenges as we have well seen but we should embrace that, not fear it. Transparency, partnerships and monitoring are the key to an improved supply chain, developing global standards, and driving out disease and waste.
