Food supply chain fairness

Last week, I had the privilege with other trade representatives to give verbal evidence to the Environment, Food & Rural Affairs (EFRA) Committee for its continued inquiry into fairness in the food supply chain.

Calls for evidence began when food inflation had recently peaked at 19.1% in March 2023, so in some senses the topic is cooling as well as the market.

That said, while inflation is well down on last year, UK food and drink prices were still 5% higher in February 2024 compared to the same time last year​​. Prices are still increasing for consumers, just not as fast as they were.

On the one hand, wages have also been growing ahead of inflation (though not by much). On the other, salary increases are, of course, not neatly uniform – some will have seen benefits, others not. And the Living Wage Foundation claims the National Living Wage, which is going up to £11.44 an hour from 1 April, still trails the voluntary real living wage (£12 an hour or £13.15 in London).

At the start of this month, the Food Foundation also claimed that 35% of UK single adult households with children and 17.6% of multi-adult households with children experienced food insecurity in January 2024.

Clearly, food banks do excellent work, but they remain overwhelmed by demand.

So, what should be done to support consumers who are hardest hit by this persistent cost of living crisis, and does it involve making the food supply chain fairer?

Inevitably, retailers and big brands are easy targets. Especially when they report sizeable annual profits, surely they could reduce prices?

Doubtless grocery retailers are powerful and drive a hard bargain. Better protections, enabling small to medium-sized enterprises to secure and maintain business, longer contracts more responsive to sudden cost changes and limits to buyers moving roles could certainly help.

Existing mechanisms, such as the Groceries Code Adjudicator, provisions in the Agriculture Act 2020 and the new Dairy Contract Regulations are all ways to ensure continued fairness.

And yet, on-shelf prices should not be the sole focus. First, prices cannot be reduced in one part of the supply chain without squeezing all parts. Second, profits as a proportion of sales are relatively small for retailers making billions of pounds in sales – margins of roughly 4% to 5% at best in most cases. They are reinvested back into businesses to keep them competitive. Is there a case for them being reinvested into their suppliers? Absolutely. That’s one area that could help them manage input costs, which, while lower than last year, are still high.

However, as I mentioned when I addressed topic of food prices in June last year, the problem of sufficient access to healthy, affordable diets is multifaceted. Some buttons offering solutions are not for retailers or suppliers to push.

The housing crisis is still a huge factor in all this. The cost of rental or mortgage payments is a crushing weight for a lot of households, even those bringing in average wages.

Raising the tax threshold for low earners, while increasing the higher rate of tax may also be a way to support less well-off households.

Consumers must play their part too. In some instances, they need to be encouraged to change their habits. Claims families cannot afford enough food while some of their members spend £7 for a beer or £12 to £13 for a pack of cigarettes don’t stack up.

Answers may not be easy, but that doesn’t mean they don’t exist. PTF awaits EFRA’s continued inquiry and eventual feedback with interest.

In other news, a legal claim has been launched against Avara Foods​​ alleging that the poultry supplier is polluting the River Wye and its surrounding area.