07/03/06
Yet more determined discounting by retailers has again confirmed
the morale sapping chasm between the cost of turning out top grade
prime cattle and the dishearteningly low returns from the market
that already threaten future beef production across the UK.
So says the National Beef Association which this week is underlining
the damage to beef sector sustainability provoked by yet more price
reductions in supermarkets at a time when a boost in beef farmers'
spirits through improved market returns is critical.
“In just four weeks over February there was a 3.5 per cent
drop in the overall average price of all lean mince streams sold
in Tesco, Asda, Sainsbury and Morrisons and a 7.5 per cent plunge
in the value of rump steak,” explained NBA chairman, Duff
Burrell .
“These crazy falls were the result of three multiples almost
simultaneously heaping a £1 per kg discount on rump steak,
a slash in the mince price by £1.20 kg by one company and
an unbelievable cut on extra lean mince from £5.50 per kg
to £3.50 per kg by another.”
“Processors too are wincing at these savage chops and one
has claimed that the damage caused by the drop in mince value alone
has stripped £10 million a week from industry earnings.”
According to the NBA these retail tactics are self destructive,
even suicidal, because the multiples are undermining their only
secure source of fresh beef by forcing even greater losses on their
most important suppliers.
“The future development of the entire UK beef sector is
being held back by myopic and unsustainable supermarket discounting,” said
Mr Burrell.
“Retailers themselves admit that beef is the only one of
the thousands of products they sell that is purchased for less
than the cost of production but are still deaf to industry arguments
that forward progress across the entire sector is being held back
by these Chicago-style price wars.”
“Unless there are genuine and effective moves to inflate
the retail value of beef it is difficult to see how the domestic
industry can survive and continue to deliver what, the supermarkets
themselves agree, is the standard and quality beef they want.”
“The multiples have also said they want to generate a long
term increase in sales revenue by concentrating more consumer attention
on top of the range quality lines sold at premium prices.”
“Unfortunately the discount disease is hitting these sections
too - and with it the long term hopes of many beef farmers.
Last week Sainsbury was selling its top mince brand for £6.82p
kg, Asda £6.79 but Tesco, which is struggling to stitch together
a suitable contract to farmers supplying its top range, was offering
its best mince for just £4.20.”
“The National Beef Association will continue to try to
persuade all retailers that future supplies of the beef they want
can only be secured if the market gives producers enough to cover
their costs.”
“But it is disheartening to see well trained and sophisticated
marketeers investing money, and other resource, into developing
strategies based on branding while not understanding the foolishness
of consistently buying the beef they say they need for much less
than it costs to produce,” Mr Burrell added.
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