The emergence last week of the news that several supermarket chains have been unwittingly selling beef products containing as much as 29% horse DNA has provoked a combination of revulsion and cringe worthy humor across the UK and Ireland. Some have pointed out that “horseburgers” are inevitable when large supermarkets drive down the cost of meat to dangerously low levels. Others have said that the Coalition’s drive to loosen regulation is likely to make such incidents more likely. Meanwhile, competing supermarkets rushed to capitalise the negative publicity that somehow seems to have focused on Tesco. Morrisons ran full-page adverts in several national newspapers claiming that their “100% British” produce was “meat you can trust”- despite their having quietly withdrawn several lines of frozen burgers themselves last week. Nevertheless, the question remains: what has gone so badly wrong with our food industry that our supermarkets don’t even know what it is that they are selling?
In short, the answer is excessive consolidation of the sector. We are all aware that the larger the buyer, the greater their ability to benefit from economies from scale, and to demand lower prices for the seller. This is why traditional, small-scale farmers, unable to balance rising production cuts and falling supermarket offers, have been going out of business, replaced by commercialised “mega farms”, able to compensate with advanced intensive farming methods. However, British public anxiety about such business has restricted their growth, leaving competitors within the European Union with a strong offer. The benefits to the public are obvious: food costs are significantly lower than they would otherwise be. The downside is easy to predict: the welfare and quality of the livestock is cut sharply back.
In the United Kingdom, 76.2% of the food retail sector is controlled by a mere four firms: Tesco, ASDA, Morrisons and Sainsbury’s. This not only has implications for the production of food, but also its consumption. Deliberate price setting, whilst not unknown, is fortunately rare, as regulations are rightly tough and well-enforced. But there is a great deal of influence behind the “big four”. They can and have successfully lobbied governments to alter both existing and proposed legislation. Local councils have often ignored the wishes of their communities to allow the construction of new branches. And with the new “convenience” format spreading across the country, even our newsagents are under direct threat.
Is it not time we corrected the existing imbalance in one of our most important industries? Special regulations should be imposed capping the market share held by any one firm at, say 10%; establishing a Food Pricing to guarantee a balanced price for farmers and customers (and yes, this may require a modest increase in the shelf cost- but the long term benefits are a necessity); and greater legal strength permitting councils to reject planning applications from supermarkets on a broader range of grounds.
Smaller supermarket chains will also have less ability to engage in union busting and artificially lower wages. Gradually, better working conditions and higher wages will be in place, which is likely to improve productivity and employee morale. In fact, the only losers will be vested corporate interests. Is that really a bad thing?
image: http://i.telegraph.co.uk/multimedia/archive/02452/horse-burger-2_2452857b.jpg