Producer organisation mergers pressed to improve efficiency and bargaining power

British producer organisations should collaborate or merge to gain economies of scale and a stronger position in the market, European Food & Farming Partnerships (EFFP) partner Duncan Rawson has urged.

Evolving markets require greater producer expertise - image: Kai Hendry
Evolving markets require greater producer expertise - image: Kai Hendry

Addressing an audience of producer representatives last week, he said: "British producer organisations are relatively small by north European standards. The industry needs to be consolidating to compete more effectively and improve its bargaining position when it supplies large and demanding customers."

These customers are themselves evolving, he pointed out. "Tesco in particular is under a lot of pressure and that will lead to price aggression, while Asda's buyout of IPL has cut out the middle man, and Morrisons is driving direct supply too."

Larger supplier groups would be able to employ the expertise needed to handle these high-volume deals, Rawson argued.

"It also enables you to add value through investment in infrastructure, research and development, and improved branding and marketing. You can drive supply chain efficiency and even access new markets," he added.

EFFP regional manager Liz Bowles said producer organisations could gain advantages of scale through a range of business models - from joint ventures to umbrella associations - to complete mergers or acquisitions, which offer greater potential to realise synergies.

Offering a wider European view, Gaston Opdekamp, managing director of Belgian producer organisation Hoogstraten, said collaboration across national borders can also bring benefits to both parties.

Hoogstraten has successfully collaborated with Dutch strawberry supplier CLTV Zundert and another Belgian supplier to form In-Co, an association of producer organisations.

This raises the level of EU support from 50 to 60 per cent and could even be more in future, Opdekamp explained. "We are pushing for this. Crisis management in particular has to managed at a European level."

He added: "When I visit shops in England, I see 'buy British' everywhere. It's not like that in Belgium. Yet our relationships with retailers are much easier. They have high ethical standards."

Producer view - Sector scale needed

Seven-member Fruit Growers Alliance director James Smith acknowledged that his organisation needs scale to become better resourced.

"I have my own business, so my time is limited," he said. "But growers in other producer organisations aren't available to us, and there are not too many independent growers. They are also likely to be PO-shy - they may think we are too expensive or controlling.

"We have had talks with most other top fruit organisations. The sector needs to be much less fragmented and the multiples want fewer suppliers. It's growers who are reluctant to collaborate - they need to understand its benefits."

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