Farmers believe they are still being exploited by big retailers. Despite OFT regulation, farmers still feel that supermarkets are abusing their position in the supply chain and forcing them to bear extraneous costs. While supermarkets’ ability to make demands of farmers could mean greater consumer control of the supply chain, the current heavy-handed approach can only backfire.
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UK farmers are continuing to feel the pinch from supermarkets, according to a Friends of the Earth survey. Despite OFT regulation aimed at addressing this long-running issue, farmers claim that supermarkets are still abusing their position of power to force suppliers to bear the costs of new packaging initiatives, special offers and unsold produce.
UK supermarkets unquestionably have effective control of the entire grocery supply chain. Their near-monolithic control of the retail sector means that farmers have to deal with them, one way or another. Even those who sell through intermediaries feel the effects of supermarket demands.
Nor indeed do the major supermarkets deny this state of affairs. Safeway was recently given a lower than expected rating by French analysts Cheuvreux due to its tendency to rely on “supplier funding”. Safeway’s defense was that this strategy in no way implied a weakness in its business plan, as it was common practice for all supermarkets.
In the face of this, farmers are left struggling. While a few will be able to adopt a value-added approach and sell at higher prices through local markets, the only large-scale buyers are the supermarkets. Regulation has apparently failed, or at least been insufficiently enforced.
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By GlobalDataIn some ways, however, supermarkets’ power could benefit consumers. Concerns over the use of pesticides, GM foods and animal treatment have become stronger among consumers recently. Although consumers have little control over farmers’ methods, they can have an influence through the supermarkets.
If consumers give supermarkets a strong enough sense that these issues matter (if they seriously affect spending, in other words) then supermarkets can, in turn, enforce these on their suppliers. However, the heavy-handed approach that farmers feel is currently being taken is unlikely to lead to long-term success. If supermarkets’ demands are seriously affecting farmers’ ability to stay in business, then they will ultimately remove consumer choice.
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