Recent shortages of fruit & veg in the mults are the result of systemic issues around low prices over many decades, according to AHDB chair Nicholas Saphir, and will need to be resolved if further supply crises are to be avoided.
In an exclusive comment piece to be published this week by The Grocer, Saphir downplayed suggestions supply chains had broken down as “too simplistic”. But he also stressed supermarket prices were too low, with suppliers finding the UK market to be “increasingly uncompetitive and less attractive”.
He pointed to how “comparably low prices” over recent years were largely because of improved productivity throughout the supply chain, coupled with competition between multiple retailers.
That was “a consumer benefit to be applauded”, he added. However, this had been achieved “during an extended period of global full supply”.
Retailers had initially been able to manage their margins through competitive buying, often at the expense of producers and supply chain returns and a targeted pricing strategy.
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But given the challenges currently faced by global supply chains and the impact of soaring production costs and the cost of living crisis over the past year in particular, this approach no longer worked, he suggested.
The determination of retailers to demonstrate their competitiveness in the high street was now exceeding suppliers’ “willingness or ability to fund ongoing margin pressure”, Saphir said.
It had also resulted in underinvestment in the UK’s production capacity for certain crops to replace imports or develop new products, where it had been simpler and cheaper to import, he added.
“The unpalatable truth is that prices paid to UK and overseas suppliers are in many cases too low to ensure supplies at times of global under-supply,” he said. “French and German retail shelves are currently well stocked, but at retail prices well above those in the UK.”
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The challenge for the food sector in the UK was therefore to “recognise the elephant in the room and to help the whole industry explore pre-competitive ways to establish a supply chain from producer to counter that reflects the real cost of efficient supplies”, he suggested.
“It will not be an easy challenge, as we are addressing 50 years of business practice and culture, but it has to be done if we are not to continue to witness increasing supply shocks caused by weather or market conditions – exacerbated in selected crops by underinvestment in UK production to replace import dependency.”
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