January 24, 2007

How much Tescofication are you willing to take?

Go on, you know you’re feeling guilty. Every time you go under the strip lighting there’s a tug on your moral conscience. You’re screwing with African farmers, filling the ozone layer with food miles and making small businesses go bust.

And yet you can’t stop yourself.

Don’t worry, neither can I. Our society’s changed so that convenience matters more to us than conscientiousness.

The supermarkets even bitch about each other. Sainsbury’s reckon their rivals Tesco will have 43% of the market by 2010, and that something should be done to stop them. They don’t mention the fact that, while smaller, they are as guilty as anyone else.

Only around 15% of the cost of a loaf of bread goes back to the farmer who grew the wheat. It’s about 30% for eggs and 40% for carrots. Few goods offer more than half of their store price to the producer.

Dairy farmers have been particularly badly hit. In 1995 they got around 59% of the retail price of milk. Today it’s just 35%. The supermarket’s share has risen from 3% to 30%. So it’s pretty clear who’s winning that battle1.

And there’s been a double-whammy for farmers. Because while most products have seen inflation of 48% since 1990, food prices have risen just 27%. It means farmers’ incomes have been plummeting in relation to everyone else’s.

So at what point do we stop praising the international success of a British business and start telling them to get their house in order? Do we expect them to start closing stores? Would a greater variety of supermarket owners make any difference to producers? Are we happy with the inevitable situation where there are only four or five food retailers in the UK?

I spoke to a greengrocer today who was annoyed not just with Tesco’s attitude to producers and small rivals, but with the people who accept it and only shop there. He works alone, in the cold, for ten hours a day, starting very early. He pours blood, sweat and tears into his job.

Is it about time Tesco and others started being put under the same pressure as him by consumers and government? Or are we happy with the convenient monopoly which makes life easy for the big supermarkets?

1. National Farmers’ Union figures


- 2 comments by 1 or more people Not publicly viewable

  1. Lee Davis

    100% markup is fairly standard with most products at every stage in the supply chain so it is hardly surprising that farmers get only a fraction of the cost of a loaf as the raw material goes through 2 further processors (flour mills and Bakers) both of which will add their markup on both raw materials and their processing costs.
    As for the convenience thing I just buy everything at Tesco because I hate shopping, can get everything I need in one go, even though I know I could even save money by shopping around and supporting local traders, however as a single person the extra time spent doing so is just not worth the savings.

    24 Jan 2007, 19:48

  2. Bosa

    If parties are capable of making a living selling milk at 35% of the retail price, why is that any less ‘correct’ than 59% of the retail price? It’s not clear to me why consumers should feel an obligation to maintain the incomes of the particular farmers who were supplying at the higher price. How can we be sure that the prevailing price and quantity of milk suppliers 5 years ago was optimal for society as compared to today?

    It’s not enough to describe how the welfare of various parties has changed over time – one must outline why their welfare of those farmers takes precedence over the preference of the significantly larger body of consumers who’re making their preferences known each time they whip out their wallet. Businesses can never be rewarded on the basis of blood, sweat and tears. You’re got to have a willing market. The supermarkets aren’t prospering purely because they have more market power – their market power is partially a function of the decisions made by consumers in the past; a past when they weren’t as dominant, and small independents were better able to compete (assuming they met consumer demands).

    It’s at this point people talk about how consumers are misguided. Supermarkets may be more convenient, may offer more choice and may be cheaper, but they’re no match for the quality of the small independent producers. Perhaps. But A being better, doesn’t mean B is crap. A BMW is better than a Rover, but we wouldn’t slag off the Rover driver who wants to spend his spare money and time elsewhere. There are tradeoffs to be made here. When I was a student (and even now), buying the best quality food just isn’t prudent – particularly when Tesco isn’t leaving me malnourished.

    I’m not considering arguments about supermarkets abusing their power in the future; purely the claim that the plight of suppliers and farmers is in itself cause for taking action.

    24 Jan 2007, 21:35


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