Are the supermarkets killing British food?
Debate: The big chains seem more popular than ever, but are they strangling small businesses and consumer choice?
Kerrr-ching! It may be a recession for everyone else, but one group of businesses doing very nicely, thank you, are Britain’s major supermarkets.
On Tuesday, Britain’s No.1 chain, Tesco, reported that underlying profits are up 8.6 per cent to £1.6billion and like-for-like UK sales up 3.7 per cent. Today, Britain’s third-largest grocer, Sainsbury’s, reported like-for-like sales up 5.4 per cent in the 16 weeks to 3 October.
The recession has been good for retailers, in part, because people have been spending less money on eating out. With some judicious price-cutting, the major chains have been able to keep the cash rolling in.
But is that really good news for the rest of us? Aren’t the supermarkets winning the war by driving farmers and specialist shops to bankruptcy, thus reducing our choice as consumers? That’s a topic that has featured heavily in the online debate spiked has been running for the past few weeks, What’s the Future of Food?
In his contribution, Tim Farron, the Liberal Democrat agriculture spokesman, is in no doubt that the supermarkets need to be reined in. Farron argues that if farmers continue to receive low prices for their produce, thousands will go out of business with devastating consequences for the rural economy and Britain’s potential for food security. ‘If you look at the price obtained for produce at the “farm gate” and at the auction market, and then see what goods are sold for on supermarket shelves, there is something very wrong there. This differential could have a damaging effect on an industry that is important economically, socially and culturally.’
Farron continues: ‘In many ways the supermarkets do good work, but they clearly abuse their power. The result is that we’re losing vast numbers of farmers. For example, we’ve lost about a billion litres of milk production in the past four years. That’s not because people are drinking less milk, they’re actually drinking more, it just means they’re consuming more from imports. This applies to a lot of aspects of agriculture, particularly livestock farming, where we’re losing capacity but we’re not reducing consumption. The only answer to this is to import – which is very bad for the environment and very bad for our farming economy.’
Farron believes a price regulator is required to ensure ‘fair trade’ for farmers. ‘A regulator wouldn’t solve all our problems and we don’t want to create a new era of expensive food when consumers are already hard pressed. But if we are to achieve a real free market then that means you have to have someone to be a referee.’
Restaurateur Ranald Macdonald agrees: ‘Personally, I think the greatest enemies of food are also the greatest purveyors of food and the people who brought food to a much wider market: the supermarkets. The supermarkets provide this magnificent opportunity for people to try a different product, but at the same time, they end up controlling what we eat. More importantly, they also control the price at which farmers are able to make a living or not make a living.’
The picture is more complicated in continental Europe. As the commentator and novelist, Jonathan Meades, points out, there is a much stronger non-supermarket food sector in France and Spain: ‘One of Britain’s problems is the Uniform Business Rate, a tax that is levied by central government nationwide, the effect of which is to jeopardise small businesses and allow the march of the supermarkets to go unimpeded. It doesn’t have to be this way. In Spain, for example, there is positive discrimination in favour of small shops – big chains pay much higher business rates and the number of hours that supermarkets are allowed to open is restricted. None of this seems likely to apply to the UK, given the country’s mania for corporatism.’
Indeed, Meades points out, there is far greater localisation in France, something the supermarkets actually encourage: ‘If one goes to the supermarket in one town, and then goes to the same brand of supermarket in a town 20 kilometres distant, you find completely different goods. I don’t mean toilet rolls and fly sprays, but perishable vegetables, meats, charcuterie, cheeses etc… This kind of support for local production is almost absent in Britain.’
But the supermarkets have their defenders, too. Andrew Opie, of the British Retail Consortium, argues that supermarkets have had a bad press, pointing out that retailers’ relationship with farmers is ‘much stronger than any other part of the food industry. If you take the dairy industry, for example, the top 10 prices paid at the “farm gate” for milk are all paid by retailers. That makes sense because retailers need a sustainable supply of milk and reward their farmers to ensure they can reinvest in their businesses.’
If farmers are getting poorly paid, that’s not the supermarkets’ doing: ‘The problem is that retailers don’t account for the whole of the food market. Going back to the dairy industry, all the retailers are paying well above the average milk price. But less than 50 per cent of milk produced by UK farmers is sold as liquid milk by food retailers; the rest of it goes into processed products… UK food retailers have little influence over that other half of the market, so it’s completely wrong to blame food retailers for unsustainable prices.’
Adam Leyland, editor of The Grocer, points out that small shopkeepers have been in long-term decline: ‘The decline of the specialist, small retailer is a trend that has been going on for 40 years. Over the past year or so, the number of independent bakers is down nine per cent, butchers are down five per cent, greengrocers down 22 per cent, confectioners down eight per cent. The number of health food stores and farm shops is actually up, however. This is a tough time and a very tough environment in which to compete.’
Leyland also notes that even the big boys are feeling the squeeze: ‘It’s not just David versus Goliath; there is plenty of Goliath versus Goliath, too… Tesco isn’t only competing against independents, specialists and farm shops, its competing against other big organisations that also have very large buying power, nationwide distribution and so on.’
Leyland is also optimistic that consumers will still have plenty of choice, despite the large percentage of grocery sales going to the Big Four supermarkets: ‘The power of the supermarkets leads to the suggestion that our tastes are being determined by a small group of buyers. If there were only one supermarket, I think there might be some truth in that. But as long as we have diversity in the market, there will be choice.’
There’s no doubt that supermarkets are now huge companies with a lot of power to call the shots with suppliers. It’s buyers that determine what we can pick and choose from on the shelves. But it’s also the case that consumers have been voting with their feet, choosing the convenience and prices of the big chains over independent local stores.
As Andrew Opie puts it: ‘While it is easy to blame a small number of big companies for problems, it is easy to forget that our food market is actually driven by consumers. Academics and policy makers often aspire to a different kind of food supply chain, but if you can’t take consumers with you, then you can’t make that change. It’s the people going to the supermarket every week to buy food that really drive the changes that are made.’
What do you think? Let us know what you think by joining in the debate here.
Rob Lyons is deputy editor of spiked.
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