Price war harms industry's ability to invest

British Growers chief executive highlights serious problems caused by the ongoing price war between the major retailers.

Shoppers: lower prices still most significant factor for retail choices - image: Word Shore
Shoppers: lower prices still most significant factor for retail choices - image: Word Shore

The ongoing price war between retailers is hampering the ability of the fresh-produce industry to reinvest, British Growers chief executive Jack Ward has warned.

"What we are seeing is intense pressure to pare off surplus costs, leading to consolidation, shortening of supply chains and a squeezing out of the chain anyone who doesn't add value," he told Grower.

"The big problem for horticulture in particular is being able to retain costs for reinvestment," he added. "Everyone has cause for concern and it's getting worse. It's not as if you can just go and find another market - they will be equally supplied."

In top fruit in particular, the problem of price competition among retailers is currently compounded by oversupply of fruit from the continent in the wake of Russia's import ban, leading to "pretty grim" prices being paid to UK apple suppliers, said Ward.

"It's getting ever more fierce," he added. "You can buy a pineapple in a supermarket for 69p. Where does that leave four apples? People need to be encouraged to value food more and to appreciate that there is a cost to producing it."

But a major survey of 180,000 shoppers by YouGov for Co-operative Food published at the start of this month put lower prices as the factor that would most make them want to shop at the retailer - though encouragingly for UK producers, local sourcing of products came a close second.

English Apples & Pears chief executive Adrian Barlow said he took heart from this latter fact, which he said encourages retailers to continue to support development of domestic production rather than merely buying the cheapest available fruit regardless of provenance.

"Prices this season are certainly lower than we would have hoped, but then we have the twin effect of a large European crop and Russia's ban on imports. Prices are still 20 per cent higher in the UK than on the continent," he said.

"The returns this season haven't been adequate to fund future investment. But though it's a disappointing season for the English industry in that sense, it could have been a great deal worse."

The British Retail Consortium, which represents big retailers, confirmed the apparent trend, reporting last week that fresh-food prices have fallen 0.3 per cent since last year. However, low oil prices are keeping down production costs too, it noted.

EU measures Programme failure lamented

The EU's crop withdrawal programme in the wake of the Russian import ban "has failed in its aim of strengthening the market", according to English Apples & Pear chief executive Adrian Barlow.

"A very large proportion of claims under the original scheme weren't approved, then the relaunched scheme wasn't fully taken up," he said. As a result there has been "a massive oversupply" of fruit for juicing and processing in particular in Europe and the UK, with even suppliers on contracts having to settle for low prices.

Meanwhile, the UK wholesale market "has been inundated with fruit at ludicrously low prices", he added. "It's been very difficult to sell the quantities through that route that we would expect." The consequences of this "panic selling" are now abating. "But the Russian ban isn't going away."

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