Tesco has come under fire from farmers and growers who claim guaranteeing stable prices to consumers is pushing volatility in the market back down the supply chain.
Speaking in a workshop session on ‘future-proofing your business for volatility’, at the NFU Conference this week, Tesco’s agriculture director Tom Hind said the retailer’s move to become closer to its suppliers through direct sourcing models has helped minimise volatility.
“We are working closer to our suppliers in order to manage volatility. We believe there are other opportunities in producer contracts and increasingly we’ve been able to extend relationships at farm level. Secondly we are asking, how can the retailer help to manage risk by forward buying?” he said.
But Hind came under pressure from the floor, after one questioner asked how Tesco can balance stable prices for both consumers and producers.
“You have hinted that Tesco wants to offer stable prices to customers – now what that means is you want to push volatility back down the supply chain,” one farmer asked.
“Can Tesco give its customers stable prices and its producers stable margins? You talk the talk but we need to see evidence that you can support us, because your profits always look better than mine,” he continued.
Hind replied: “You’re losing sight of the bigger issues here, which are consumption and competition. We need to focus on quality, and ensuring the product remains relatively affordable faced with the competition.”
He added that Tesco has worked with key top fruit suppliers to help them maximise packing facilities outside of the British season, using fruit from overseas.
Elsewhere in the session, agriculture manager at HSBC, Allan Wilkinson, warned that businesses’ should look to internal management skills in order to ride out difficult market conditions.
“Management improvement and cutting costs of operation are the most important aspects, and will enable you to thrive once the prices go back up,” he said.
“What we know about volatility is that prices will go back up, we just don’t know when. One year’s loss doesn’t make a bad business,” he continued.
Another panelist stressed that management skills are crucial to helping a business through difficult times.
Managing director of arable farming group Brixworth Farming, Charles Matts, said: “To me, it’s really important that any farm manager has good management skills that extend beyond their technical ability.”
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