|
> Home
> News cuttings >
Tesco
Yorkshire Post - 29
January 2007
It’s Tesco: of course it’s Tesco. When anyone talks about supermarket power they mean Tesco. Tesco is the superpower amongst supermarkets. The figures are so big they soar beyond comprehension: £41.8bn of global sales; 1,898 UK stores with another 124 opening shortly; 31 per cent of the British grocery market. There are only four British postal districts without a Tesco store: the Shetland and Orkney Islands, the Outer Hebrides….and Harrogate. A far cry from 1919 when Jack Cohen opened his shop and totted up his first day’s earnings….£4.
The supermarkets hare back under Competition Commission scrutiny. The preliminary findings suggest that the supermarkets will not be quaking in their corporate boots. But the Commission does ask one particularly interesting question: why have supermarkets creamed off virtually all of the increase in milk price over recent years – and why are farmers so reluctant to back up allegations of supermarket abuse of purchasing power with hard evidence?
This is a hugely familiar complaint. Farmers for Action, a (by farming standards) militant group orchestrated by David Handley and the NFU have long complained that they are the victims of over-mighty purchasers which are driving the milk price below the level of economic survival. FFA claims that the average dairy farmer is losing about 4p per litre (it is difficult to generalise about the prices farmers receive but 17 -18p per litre is as good a working benchmark as any though the price different farmers receive in the same co-operative can vary by 5p and more per litre).
It is true that the dairy industry is under real pressure. Farmers are quitting in droves. The 26,500 dairy farm business in 2001 had shrunk to 20,000 five years later. The average herd size had risen to from about 84 to 105, milk yield had increased giving an output per holding of 720,000 litres compared with 557,000 litres five years earlier- a 29 per cent increase per holding which is a direct consequence of a falling milk price and increased costs.
It is always a hazardous business extrapolating sets of figures, but if the trend of the past five years held good over the next five we would see herd numbers down to around 12,300; herd size up to about 139, yield rising again and the average output per farm hitting 1m litres for the first time.
There have been doom-and-gloom forecasts that Britain could run short of milk and have to import it (in fact organic milk is imported because of shortage of supply in the UK). Even five years on this does not seem likely with the possible exception of the single month of November (when output hits its “trough” as opposed to the “peak” output when the rich spring grass of April is grazed).
Of course things could get worse- for example, as farmers come up for investment decisions they may not see any real prospect of prices justifying heavy capital spending. They quit and look for alternatives in beef and sheep. Equally, if supply really looks like tightening the big buyers will want to secure their raw material. There has been a trend recently for retailers to sign up their own dedicated farm suppliers. Asda, for example, has its own farm suppliers within the Leeds-based Arla operation, and Marks and Spencer and Waitrose - much smaller players – have their own circle of dedicated farmers. This trend could become generalised.
But why have farmers had such a rough time? The answer is that milk is a buyer’s market. All product markets ultimately take their cue from commodity prices. The European Union has been taking advantage of high world prices for dairy products to cut the export subsidies it gives for products like skimmed milk powders. This plays through back into the farm-gate price.
Yet not all is doom and gloom. The market is changing – and with it there are real opportunities for British farmers and processors. The British market is unique because of the dominance of liquid milk sales – 49 per cent- and has been in long-term decline. This decline has now been arrested by the development of branded milks. Leeds-based Arla’s Cravendale highly-filtered (and hence longer-lasting ) milk; Wiseman’s The One (low fat) milk; Dairy Crest’s omego 3 enriched milk aimed at child growth.
The old staple of cheddar is also seeing differentiation and branding. Cathedral City (Dairy Crest) and Seriously Strong/Farmy/Mild from McLelland are showing strong annual growth. Brands are the escape route from the straitjacket of commodity pricing.
Increasingly products making health claims are filling the shelves – pre and pro-biotic yogurt and yogurt drinks in a profusion of brands and flavoured “fun” milk or milk-based drinks are capturing a young audience. Organic milk and milk products are growing strongly.
It is not surprising then that the dairy co-operatives are seeking to establish themselves in the market place – and to earn a dividend for their members from sales of products to supplement the income from sales of raw milk. Glasgow-based First Milk recently bought Dairy Crest’s own brand cheese business. Milk Link and Dairy Farmers of Britain are both investing in processing capacity. Dairy Crest – the company with the strongest portfolio of brands – recently acquired a French business. Arla’s structure could change as discussions proceed with its majority owner, the Continental co-operative Arla-Amba. First Milk has a 15 per cent stake in its Glasgow neighbour, Robert Wiseman Dairies, which is itself investing in facilities in the West Country.
There is an even bigger challenge for the industry – to come out on top of the new food politics. The old politics- the future of the CAP, world trade, the share-out of the cake – are still around. But increasingly the issues of “lifestyle” ones like nutrition, obesity, salt content, nutritional labelling and quasi ethical ones like fair trade, food miles, environmental sustainability as alarm over climate change grows.
The dairy industry is in a fight for its life to establish its place as a modern product responding to modern needs. Milk and cheese are Homeric products; they are Biblical products. They now have to come good in the age of the internet.
In short from Homer to Tesco!
© Yorkshire Post
|
previous page