Last week the NFU unveiled a report that painted a bleak picture for the future of UK horticulture if the retail supply chain doesn’t change. Michael Barker reports on an industry facing up to an impending crisis
ondon Zoo isn’t the typical place for major horticultural announcements, but then this was no ordinary occasion. The iconic site, with its reputation for saving endangered species, had been carefully selected for the symbolism that comes with a need to protect an industry apparently at risk of losing some of its most treasured crops.
It made a poignant backdrop to the release of a report that was not for the faint hearted. In a press conference high on drama and backed by a raft of painstakingly researched statistics and grower interviews, the National Farmers’ Union unveiled a dossier claiming that several of the UK’s most cherished crops were in danger of disappearing off supermarket shelves within the next few years.
On the most severe, “endangered” list were cucumbers, tomatoes, mushrooms, salad onions and broad, runner and dwarf beans. These crops have seen British production fall by more than 20 per cent over the past decade, with self-sufficiency significantly lower, confidence to reinvest falling and imports threatening to overwhelm domestic crops on the shelf.
And it didn’t stop there. Brussels sprouts, cauliflower, lettuce and leeks were labelled as “at risk” - with British production falling faster than consumer demand and growers moving into other crops or quitting altogether - and there was even the warning that success-story lines that are in healthy growth, such as strawberries, top fruit, asparagus, plums and peppers, could eventually get dragged into a similar downward spiral if nothing changes.
So what’s brought the industry to the brink of crisis? It’s a complicated picture of uncollaborative, unsustainable retail practices and promotional strategies that target short-term gain ahead of mutual long-term profit, according to the NFU.
Specifically, there is a lack of trust and confidence within the supply chain, with poor practices undermining growers’ ability and willingness to invest in the new facilities needed to help them increase production profitably (see box, page 26). One of the major bones of contention has been promotions, the length and depth of which is causing consternation within the supply chain.
The seemingly never-ending price wars, such as those that run on bananas, have become fresh produce fable, with suppliers’ protests that consumers are not aware of the value of the price-inelastic line falling on deaf ears. The price of a kilo of bananas has not risen over £1 for years, but other long-running promotions, which critics say are not even timed to coincide with supply gluts, are causing similar anger.
To tackle the problem, the NFU has created the Fruit and Veg Pledge, a commitment aimed at encouraging buyers to take a more collaborative approach to supplier relations.
The pledge commits to greater price certainty for growers - regardless of whether or not promotions are running - to allow them to plan and budget without fear of losing out financially; a more collaborative approach featuring, crucially, more production-led promotions, which are matched more to supply and demand and less based on the previous year’s programme; long-term supply contracts between everyone in the chain; and the establishment of production programmes that bring an end to the practice of supermarkets calling up as crops are about to be harvested and cancelling the order.
Pledges, of course, are all well and good, but how will the NFU police it? “We will be urging retailers, packers and processors to sign up and will publish the fact on our website,” says Hayley Campbell-Gibbons, chief horticultural adviser. “And we will be monitoring it. We want to see buyers on the ground acting in a way that the supermarkets’ CSR pledges claim. These two sides of the business need to be connected. And we will be speaking to the growers again [to ensure commitments are kept].”
For supermarkets, there is the chance to gain some positive PR by signing up and including it within their corporate responsibility pledges, much like, one assumes, has happened in the case of the sustainable sourcing of fish. The union believes that the positive message of supporting British farmers will resonate strongly with consumers.
But is it all the supermarkets’ fault? According to an EFFP report, cited by the NFU, the UK horticulture sector has neither embraced nor reacted to the need for structural change in the way that, for example, the Dutch have done, therefore damaging British growers’ ability to compete.
Also, there are a large number of “intermediaries” - identified as packers or marketing agents - which in many cases have made a very positive contribution to the industry but in some incidences offer a lack of financial transparency towards growers.
“There is a view that, in some sectors of horticulture, more consolidation is needed at an intermediary level to reduce ruthless competition for a limited market share,” the NFU report says. The practice of ‘marginal costing’, whereby a company chases share by offering a proportion of produce at a very low price, has been particularly criticised.
Growers could also benefit from analysing their production costs more closely and benchmarking against competitors at home and abroad, the report adds, and it calls on the industry’s levy bodies to take the lead in promoting and facilitating collaboration and education on the benefits of analysing and sharing financial data.
The NFU insists its report should serve as a “warning” of the consequences of failing to address these issues. Campbell-Gibbons says there is “still huge potential to grow the industry” provided these problems are addressed, and there can be more success stories like those crops that fall into the ‘growing’ category.
But the union is equally clear that if suppliers’ grievances are not addressed, then those ambitious retail pledges to increase British sourcing will be impossible to meet and instead, many of the most popular crops on the nation’s plate will have to be imported.
The ball, the NFU’s message clearly states, is now very much in the retailers’ court. -
CASE STUDY: SARAH DAWSON
Chair - NFU Board for Horticulture
NFU horticulture board chair Sarah Dawson outlined the experiences her own field vegetable business had been through.
The fourth-generation family firm grows brassicas, peas and cereals, but had to quit Brussels sprout production after failing to make it pay. And growers are having to carry an unfair level of responsibility for the tough and unpredictable job of growing food, she believes: “Many factors are forced upon us by the supply chain. We are carrying the burden and the cost of challenges we have not created and cannot control.
“You spend ages planning the crops and then you get a call on the day of harvesting saying ‘we don’t want that’. That is a soul-destroying situation. A lot of time and effort goes into producing that crop, and we cannot cope with these supply-chain pressures.
“I accept that demand changes. We can predict that to a degree but growers are left to carry the cost of decisions made up the supply chain. The burden of cost stops with the grower and we cannot afford to take that risk.”
POOR PRACTICE EXPOSED
The NFU has identified examples of poor practice taking place within the UK supply chain. These include:
•Over-riders: The issue of ‘sales support’ - despite being outlawed under the Groceries Suppliers’ Code of Practice - is known to go on. Over-riders are described as being in the region of around three per cent of a supplier’s total business to a
retailer, but cases of over five per cent have also been reported.
•Lack of price certainty: The lack of stability makes budgeting a major challenge, with added pressure to lower prices and help fund promotions at short notice.
•Verbal margin agreements: GSCOP says agreements should all be in writing, but many growers have alleged retailers commonly request a minimum profit margin, to be maintained even during promotions. The NFU says these margins can exceed 50 per cent.
•Late payments: There is said to be a growing problem with late payments, with a recent BACS report saying late payments to small businesses have reached an all-time high.
•Promotions: The issue of who pays for promotions is a sore one. While most are happy that these help drive demand when production is strong and boost sales of a crop, they can have an adverse effect on the supply chain when run for an extensive period or not managed closely. Their timing can also appear illogical.
•Retendering of business: While this ensures competition in the market, frequent retendering can cause uncertainty for suppliers.
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