David's merger concerns

JUST over a year ago I made the ‘big’ move and flew the coop from my parent’s farmhouse all of about half a mile to my very own cottage. 
It’s been fantastic to have my own space and my daily commute to the dairy has dramatically reduced to only a matter of yards. 

One of the less attractive parts of moving out has been having to cater for myself and in turn make the onerous trip to the local supermarket to buy my supplies. One plus side to this hardship is that Kinross’s main supermarket just happens to be the same one to which our milk contract is aligned. 

For just over 10 years now we have been supplying the famous orange supermarket with our milk. Five out of those 10 they have paid us on a cost of production system resulting in us having a fair and consistent price for our milk which, in turn, has allowed us to invest in our business and has given us some security in the extremely volatile UK milk market.

So, as you might imagine, it is with some trepidation I read the news that Sainsbury’s is to merge with long term rivals ASDA and leap-frog Tesco to become the biggest supermarket retailers in the UK. 

Understandably, this has been met with grave concern within the agricultural community, especially after it was announced that shoppers could expect a 10% discount in the overall cost of their weekly shop. The consensus being that those savings will be made at the farmers’ end of the supply chain. 

It would appear that it is not just me who is looking at this news with trepidation. Just this week, the Environment, Food and Rural Affairs Committee has announced it will hold a one-off evidence session into the proposed Sainsbury’s-Asda merger. 

One-off evidence sessions aside, according to the majority of industry experts and especially in the wake of last year’s Tesco-Booker merger, it’s looking highly likely that the orange and green shops will soon be one. But can we really be too shocked by the news of this merger? Does it not really paint a picture of the wider issues around where and how the consumer chooses to do their shopping in 2018? 

Re-wind to around a decade ago, just before the financial crisis. All four main players in the UK supermarket game at the time were booming, large mega stores were popping up all over the place. Their average consumer had good disposable incomes and in general were loyal to one store and would make the trip there once a week. 

Whilst there was good competition between these four shops, at the time they were all operating on similar models and there appeared to enough room for them all to do so comfortably.

Fast forward to 2018 and the situation couldn’t be much different. Even 10 years after the financial crisis, consumers are still feeling the pinch on incomes. This has resulted in shopping patterns changing quite dramatically. 

For a start, the traditional weekly shop has been changed from that one big weekly shop, to little and often in order to fit in the most chances of getting a bargain. The biggest change, however, is that the top four of a decade ago no longer have full control of the market. 

The massive growth of the discount German retailers and others has resulted in consumers ditching previous loyalties and instead seeking out the cheapest deals they can, regardless of the name above the door. 

This change was on the whole un-forecasted by the original big four and I believe this news of a potential merger is not as out of the blue as some are making out. Instead, I’d say it’s a delayed reaction from the parties involved to changing circumstances. 

The truth is, as long as the British consumer demands cheap food, then the supermarkets will do all they can to accommodate them. Once again it comes down to the majority of consumers’ main concern being getting what they want at the cheapest possible price and other concerns such as provenance and quality taking an ever increasing back seat. 

It is that increasing amount of consumers’ apparent lack of concern about where their cheap food is coming from that really is the biggest threat to us as producers. 

But is it too easy to look over the fence and say it’s entirely the consumer’s fault for not supporting us? Is it not the fact that the way supermarkets trained the consumers to shop in those boom years, with endless amount of choice and the obliteration of any kind of seasonality linked to fresh produce, has resulted in our British and Scottish produce being lost in a sea of imported substitutes. 

Then there is us as producers. Should we be fighting harder to have more control of our produce from the supermarkets? Is Brexit the catalyst for us to finally start to re-educate the consumer to how fantastic our produce really is?

So whilst the teams at Asda and Sainsbury’s (Sasda?) are starting to figure out how they’ll ever get orange and green to work out OK, we as an industry will hopefully take time to ponder these important questions.