UK fruit and vegetable production is still under pressure and lacks sufficient returns to invest for the future, according to a new report from the NFU, following up its 2012 Catalyst for Change report that first identified structural weaknesses in the sector resulting from its relationships with its main customers the supermarkets.
Launching the Catalyst Revisited report at last week's Onion & Carrot Conference in Peterborough, NFU horticulture and potatoes board chairman Guy Poskitt, himself a carrot producer, said: "There has been progress but the job is far from done. Growers fear the retailers are regressing to the bad habits of old. They describe dealing with them as a battlefield, and they lack the confidence to invest because they aren't getting the returns. We don't hoard money, we put it back into the business. But even growers I have spoken to here are feeling the pinch."
The original Catalyst for Change report in 2012 exposed a culture of poor business practice in the fresh-produce sector and warned that left unchecked this would lead to higher levels of imported fruit and vegetables as British growers cut back. "It found a lack of certainty, of transparency, and pressure to lower prices and to contribute to the cost of promotions," Poskitt explained.
Now, he said: "Everyone is still struggling for margins. The supermarkets' race to the bottom is causing growers to cut back, so the volume of UK production is down. No one is growing that spare field of cabbage in case supply is short."
On what measures the NFU is seeking, he said: "It's a risk business and risk needs to be shared. We need buyers to be clear, and to commit in advance, before growers have committed to the crop." For carrot growers, that means knowing that a crop sown next spring for harvest in winter will find a market the spring after that, he added, but they can be longer-term still. "Five-year deals let you invest, replace kit, take labour out of the business. But progress on this is slow."
On forecasting, he said: "Growers are also shouldering too much risk when it comes to inaccurate forecasts. These need to be held to within agreed tolerances." And on promotions, he said retailers need to work jointly with growers, adding: "They have a place, but need to be well planned."
He praised the contribution of groceries code adjudicator Christine Tacon: "The sector was rife with breaches of the code and that's an area where things have improved a lot. Christine is like a Rottweiler in the farmyard - without her the situation with kickbacks and requests for cash would be very different. But her job isn't done yet."
He added: "A lot of suppliers still don't understand the protection they can get from the code. For example, if you supply IPL (Asda's wholly-owned produce supplier) you are covered."
Another improvement is in the area of written contracts, he said. "But there are still some growers who don't know what a contract is. They need to say to their customers: 'We need this, not to stitch you up but so we can work well together.'"
Restating his call to other supermarkets to sign the NFU's Fruit and Veg Pledge, reproduced in the new report, Poskitt said: "It's not a commitment to price but to the longevity of the industry." The full report can be downloaded free at nfuonline.com.
Good and bad factors in relationships with retailers
• Aldi has endorsed the NFU’s Fruit and Veg Pledge, a charter of best practice covering relationships and risk between retailers, intermediaries and growers.
• Tesco is set to launch a fresh potato supply contract offering growers a longer-term deal and transparency on price.
• The adjudicator has reduced breaches of the Grocery Suppliers Code of Practice governing relationships between the largest supermarkets and their suppliers.
• Wider use of written contracts in place between suppliers and retailers.
• The length of the British growing season and the variety of crops produced is increasing.
• Imports of fruit and vegetables now at record levels, while household purchases of unprepared fresh fruit and vegetables in decline.
• Growers report being weaker side in "battle" with supermarket customers.
• Farm incomes from horticulture remain volatile.
• Danger of UK sector becoming uncompetitive internationally due to underinvestment.