Opportunist dealing in the UK pig meat supply chain: Trader mentalities and alternatives

Abstract

The scandal surrounding the presence of horsemeat in UK supermarket meat products has focused public attention on the problems of complex, fragmented food supply chains. Through a study of the UK's pig meat supply chain, this paper proposes a new framing of the problem in terms of opportunistic dealing adopted by the supermarkets in vertically disintegrated supply chains, where all actors attempt to pass the risks and costs onto somebody else. This outcome is the result of cultural practices and competences in buyer-led supermarket organizations where strong supermarket chains have the power to capture processor and producer margins. One consequence is that mass-market meat production and processing is close to unviable, as evidenced here by the analysis of the VION Food Group. However, there are mainstream alternatives to the retail-led dysfunctional supply chain. This paper presents an alternative integrated supply chain model using the case of Morrisons, the UK's fourth largest supermarket chain. If fragmented supply chains are not inevitable, the important issue explored in the conclusion is how the inadequacies of government policy, which understands the problem of the sector but is stuck with a competition-based mindset, obstruct the creation of a more sustainable supply chain.

Keywords:

• Meat supply chains
• Supermarket power
• Pig meat supply
• Vertical integration
• Business models

Acknowledgements

The six-month research project from which this paper is derived was co-funded by the Economic and Social Research Council and a meat processor, VION UK, who believed that there was a need for an independent academic review of the supply meat chain and an exploration of alternative models. The authors are solely responsible for the contents of the final report, but they have benefited from supermarket, processor and producer comments on a draft of a public interest report that preceded the publication of this paper.

Notes

1 The full report of the project is available in Bowman et al. (2012). The objective of this project was to produce an independent academic study of the pig meat sector in the UK. VION did not provide any confidential data nor did the study consider issues specific to VION; rather, the aim was to consider sector-wide themes and issues.

2 The BMPA note that the low share of UK meat is a particular problem and, in evidence to the EFRA Select Committee, argue that retailers have used unclear labeling to imply that some pig meat products are from British reared pigs (not imported meat processed in the UK) (2009, p.21).

3 There are significant differences in the demand for different cuts of pig meat. For example, meeting UK demand for shoulder products would require 6 million pigs per year; leg and chump, and loin and rib would respectively require 19 and 23 million pigs to meet domestic demand for those cuts. This difference leads to the simultaneous over- and under-supply of different cuts and pressure to import pieces of meat (not whole animals) as well as to dump surplus meat.

4 Estimates of producer margins vary considerably depending on the year and the sample, but the EFRA Select Committee in its 2009 report cites average losses per pig that have been rising – for example, in 2007, the average production costs were £1.44 per kg with farm gate prices at £1.10 per kg on average (2009, p.7).

5 The Winsford factory was relatively new, built in 2005 as one of three sites that would supply own label fresh pork to Asda.

6 The 180 jobs were at VION's Scunthorpe bacon factory, lost when Asda switched suppliers to Forza AW, a smaller new entrant (The Grocer 6 November 2010; The Meat Trades Journal 19 March 2010).

7 Source: InterPIG and BPEX.