The UK mushroom industry has decreased in size by 70 per cent in the last five years, estimates Smith, who puts the retail volume reduction in that time at a ball-park 4.5 million lbs a week to 1.5m lbs a week.
The number of companies operating as retail suppliers was between twice and three times higher before the crash and some of the longest-established names in the business have either disappeared without trace or been swallowed up by merger or acquisition.
Greyfriars chief John Smith believes that any hope that things can only get better may well be a forlorn hope. “Much as I don’t like to be too pessimistic, there is no real scope for hope in the short term,” he says. “I ask myself whether the UK industry has been in a state of wilful denial and the only logical answer is that it has. The industry has to face up to its denial. The major players that have survived have generally been those with the longest pockets and occasionally companies with another cunning plan. When you are losing money hand-over fist as a company, where does it come from - the shareholders. And that money is being pumped in in the belief that sooner or later there has to be a correction in the market.
“I wonder whether, in the light of what is happening in Poland and the on-going supermarket price wars, the timing of corrective measures will be precisely what we would all like it to be.
“A lot of mushroom growers struggled on for a while, but as cash resources ebbed away, they pulled out rather than putting more good money where it would be wasted. We haven’t seen the end of that. Wanting something to happen and it being likely to happen are two entirely different things. I would not be surprised if the size of the industry halves again - it will drop below 1m lbs a week within the next two years.”
Smith believes that the factor that has traditionally been a strength of the mushroom industry for so many years has now become an inherent weakness. “Most of the mushroom companies have been built by individual entrepreneurs who are steeped in the mushroom mentality. Ronnie Wilson at Monaghan, Pat Walsh at Walsh Mushrooms and Jim Rothwell at Rothwell & Sons, for example, have all built large companies through their love for the product and the entire production process.
“Because they are so committed they will hang on until the bitter end. But produce is a pretty unique industry, if they were in the car parts sector and in a similar position, they’d be looking at other options. The average age of the executives in this sector is probably around 60; there are few sons and daughters who fancy taking on the seven-days-a-week pain and angst of the mushroom industry now.”
So why did the UK mushroom production industry plummet so quickly? Smith looks elsewhere for some of the over-riding reasons and pinpoints a number of contributing factors.
Competition from other sources has stepped up and the sterling:euro exchange rate certainly didn’t help the general malaise. “It has been a killer. Sterling rose to around 71p against the euro last year, which allowed British-grown mushrooms to compete against the Dutch and southern Irish product, but now it is back to 66p again the opportunity is there for imported product from Holland and Ireland.”
The transformation of Ireland on entering the European Union in the 1980s was arguably the beginning of the downward spiral for UK growers. “The Irish industry set off 30 years ago on the basis of the low value of the punt, as well as the availability of high quality mushrooms. But the country increased its levels of sophistication as it began to utilise the opportunities given to it by EU funding and that gave mushroom growers a very good platform. The positive people flow from eastern Europe has eradicated part of the major problem the Irish had - the high cost and lack of availability of labour, but this has been a struggle and grower numbers have dropped from around 1,200 to 400. These growers, however, are responsible for the arrival of 2.5m lbs of mushrooms a week in the UK market, almost 40 per cent of the overall volume.”
The Irish sector is not without its problems as mushrooms in general suffer from the commodity backlash. “As in the UK, the viability of the Irish industry has certainly taken a knock in the last 3-4 years,” says Smith, “which prompted some farmers to leave the industry and others to get bigger to spread their overheads.”
On the other side of the Channel, the Dutch have their own problems, he adds. “Holland is a high-cost country in which to produce, but their farms are very productive. They have suffered for a while from the amount of Polish product that is now sold to their previously strong German and French markets, which has led the Dutch to concentrate heavily on the only other major consumption area open to them - the UK. The economics of mushroom production are heavily linked with the labour costs at source and Poland holds the advantage in Europe.
“Polish exporters have made significant inroads against the Dutch in Germany, but also penetrated the UK very successfully. There are now 1m lbs of Polish mushrooms coming into the UK a week, compared to nothing five years ago, which piles the pressure on the Dutch as well as the Irish and UK suppliers. Dutch mushrooms are dominant in Asda and have a presence in Tesco and Sainsbury’s, but are generally being squeezed.”
Greyfriars has handled a large volume of Polish mushrooms for its Morrisons and Tesco accounts for the last two years. “They are doing an outstanding job in Poland,” says Smith. “There is a general willingness to invest significant sums of money in infrastructure and processes to enhance their ability to serve the UK market. “The farm we use has invested e3m in EurepGAP and BRC accreditation and produces an outstanding product. It is also introducing Phase III compost, moving away from Phase II, which can cut as much as two weeks out of the production cycle and increase production capacity by around £100 a tonne. The reality is that for the next 3-5 years at least the UK market will be supplied with about 50 per cent more Polish product that is highly acceptable to the multiple retailers.”
The insularity of producers from these isles exacerbates the problem. “The UK producer supplies the UK market, full-stop,” says Smith. “And therefore the pressures we are all feeling now will continue for some years to come.”
He adds: “I suppose there is relevance in questioning whether there needs to be a UK mushroom industry. Historically, there definitely has been a need, particularly in order to meet the just-in-time orders of the supermarkets. But such are the advancements in imported product quality and logistics, that is less of an issue. The four leading supermarkets are driven by straightforward city requirements; they need to maximise their profits for shareholders. In those circumstances, loyalty is worth a ha’penny off in my view. The rest of the supermarket sector does not have the same capacity to dramatically affect the viability of the mushroom industry.
“Consumers want their mushrooms year-round, they are not that fussed where they come from as long as they are safe to eat, and the supermarkets ensure that product is brought in from safe and sound places as cheaply as possible.
“Meanwhile they continue their price war on the high street and it is the suppliers that have to take the strain. Mushrooms have always been a Known Value Item (KVI) and while some of the magazines that measure these things have removed them from the list, the retailers have left mushrooms in there. As long as they remain a KVI, the industry is on a hiding to nothing. Whether it is sourced in Holland, Poland, Ireland or the UK, fundamentally there is no difference.
“We cannot expect [the customers] to have a philanthropic bone in their bodies and as an industry we have to take all of these things on board when we consider the future. “
Greyfriars re-evaluated its position five years ago, when Smith joined after a career in the engineering industry. The long-term outlook for mushrooms, it decided, made it necessary to diversify. Garlic, cabbage and most recently the most northern UK sweetcorn crop have now been added into the fold, all with a view to adding value to the offer rather than having it taken away. “I used to think that a company needed one product and several customers,” says Smith, “but that has all but reversed now.”
While still not sure he agrees with the trend, he is firmly of the opinion that bucking it is unlikely to be the safest option.
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