>>farmer-controlled businesses extolled: Stuart Thomson of English Farming & Food Partnerships
We regularly hear major retailers and suppliers extolling supply chain collaboration and the benefits of working more closely with farmers. Not only does this make commercial sense, we are told, it also helps to secure domestic food supply in the longer term.
This will be music to the ears of farmers. As the weakest link in the food chain and facing the task of adjusting to CAP reforms, which will phase out the buffer of production subsidies, any affirmation that they are not alone but part of a valuable supply chain will provide a real boost.
This is a good theory that struggles to deliver in practice. Supply chain structures must therefore be developed that can deliver real benefits to all concerned.
The scale of this challenge should not be underestimated. The current structure has a large number of relatively small farm businesses supplying fewer and fewer larger customers. For any retailer it is essential to control costs. For the processors in the middle, this means doing whatever it takes to minimise the price of raw materials.
Therefore British farmers are squeezed from both sides, facing lower prices for what they produce while being unable to pass costs on to the large companies selling feed and fertiliser.
No surprise, then, that talk of supply chain collaboration instils optimism into farmers, albeit with a touch of cynicism.
Through the 1990s, consumer expenditure on food rose by more than 50% to over £100bn. However, over the same period the value of farming output remained static. The opportunity therefore is for farmers to first add to and then retain a greater proportion of this value.
How does a relatively small farm business, one of over 150,000 other farm businesses, do this?
Sir Francis Mackay, chairman of the Compass Group, stated at the City Food Lecture that farmers can help his business by “forming larger collectives such as co-operative groups in order to be able to meet the significant volume demands”.
Not only can professionally run co-ops or farmer-controlled businesses offer a simple and effective approach to meeting customer needs, they can also act as experienced and knowledgeable intermediaries, bridging the gulf with the rest of the food chain.
In other parts of the world, farmers have
long invested in establishing farmer-controlled businesses to help them add value to their products and retain the rewards. These businesses now produce successful global brands such as Ocean Spray, Anchor, Danepak, Sunkist and Sun-Maid. Moreover, in the US and New Zealand a new breed of farmer-controlled business referred to as New Generation Cooperatives, is adding value to the supply chain.
While few businesses of this magnitude exist in England, there are signs that our own such sector is starting to restructure and grow. For example, three large dairy co-operatives control nearly 50% of the liquid milk market and companies such as KG Fruits and G’s Growers are growing successful businesses in fresh produce.
The common theme for all is that by providing a quality product and service to their customers and allowing farmer members to invest in adding value beyond the farm gate, farmer-controlled businesses deliver benefits to all concerned.
English Farming & Food Partnerships was set up to promote collaboration across the supply chain and to support the growth of these businesses.
It remains our belief that if encouraged to grow along these lines, they will not only play an important role in turning theory into practice, but will also help ensure the long-term security of the UK’s primary production base.
If processors, retailers and foodservice companies are serious about supply chain collaboration, it is this farmer-controlled business sector they should be turning to.
We regularly hear major retailers and suppliers extolling supply chain collaboration and the benefits of working more closely with farmers. Not only does this make commercial sense, we are told, it also helps to secure domestic food supply in the longer term.
This will be music to the ears of farmers. As the weakest link in the food chain and facing the task of adjusting to CAP reforms, which will phase out the buffer of production subsidies, any affirmation that they are not alone but part of a valuable supply chain will provide a real boost.
This is a good theory that struggles to deliver in practice. Supply chain structures must therefore be developed that can deliver real benefits to all concerned.
The scale of this challenge should not be underestimated. The current structure has a large number of relatively small farm businesses supplying fewer and fewer larger customers. For any retailer it is essential to control costs. For the processors in the middle, this means doing whatever it takes to minimise the price of raw materials.
Therefore British farmers are squeezed from both sides, facing lower prices for what they produce while being unable to pass costs on to the large companies selling feed and fertiliser.
No surprise, then, that talk of supply chain collaboration instils optimism into farmers, albeit with a touch of cynicism.
Through the 1990s, consumer expenditure on food rose by more than 50% to over £100bn. However, over the same period the value of farming output remained static. The opportunity therefore is for farmers to first add to and then retain a greater proportion of this value.
How does a relatively small farm business, one of over 150,000 other farm businesses, do this?
Sir Francis Mackay, chairman of the Compass Group, stated at the City Food Lecture that farmers can help his business by “forming larger collectives such as co-operative groups in order to be able to meet the significant volume demands”.
Not only can professionally run co-ops or farmer-controlled businesses offer a simple and effective approach to meeting customer needs, they can also act as experienced and knowledgeable intermediaries, bridging the gulf with the rest of the food chain.
In other parts of the world, farmers have
long invested in establishing farmer-controlled businesses to help them add value to their products and retain the rewards. These businesses now produce successful global brands such as Ocean Spray, Anchor, Danepak, Sunkist and Sun-Maid. Moreover, in the US and New Zealand a new breed of farmer-controlled business referred to as New Generation Cooperatives, is adding value to the supply chain.
While few businesses of this magnitude exist in England, there are signs that our own such sector is starting to restructure and grow. For example, three large dairy co-operatives control nearly 50% of the liquid milk market and companies such as KG Fruits and G’s Growers are growing successful businesses in fresh produce.
The common theme for all is that by providing a quality product and service to their customers and allowing farmer members to invest in adding value beyond the farm gate, farmer-controlled businesses deliver benefits to all concerned.
English Farming & Food Partnerships was set up to promote collaboration across the supply chain and to support the growth of these businesses.
It remains our belief that if encouraged to grow along these lines, they will not only play an important role in turning theory into practice, but will also help ensure the long-term security of the UK’s primary production base.
If processors, retailers and foodservice companies are serious about supply chain collaboration, it is this farmer-controlled business sector they should be turning to.
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