Retailers warn of food trade jobs losses

Food supply-chain jobs will be lost due to supermarket chains acting to bypass the wholesale sector, Retail Excellence Ireland chief executive David Fitzsimons has warned.

His comments follow a €25m investment by retail group Morrisons in an abattoir in Lancashire. The chain has invested €250m in the food manufacturing side of its business.

Morrisons chief executive Dalton Philips said: “If market conditions continue, we will become the UK’s largest manufacturer of fresh food by 2015. This will build on our record of serving the freshest and best food our farmers have to offer with minimal waste in the supply chain.”

Morrisons is also building up its own fruit, vegetables and salad packing, seafood and meat processing operations. It is also to recruit 200 staff at its seafood processing business in Grimsby.

Mr Fitzsimons said Ireland’s food supply chain has been under similar pressure for the past four years.

“Every aspect of retail has moved to a lean model,” said Mr Fitzsimons. “We have seen it in the fuel business. With food, most retailers have been going direct to source. We have seen it with Nisa Today negotiating directly with suppliers on behalf of Nestlé. The Morrisons move is a step beyond that again.

“Any market dominance is unwelcome. If a small number of retailers control the market, or dominate the supply or distribution channels, it will impact negatively on the consumer’s choice. It will also cause job losses.”

Mr Fitzsimons said that, in most western societies, the top three food retailers control 70% of the market. He said Ireland crossed that milestone with Musgrave’s acquisition of Superquinn.

He said Tesco Extra outlets spend 5.5% of revenue on labour, compared with the 15% spent by small independent stores.

“The French retail model is better,” said Fitzsimons. “They have regulated it so that each town has one ‘big box’ outlet like Carrefour on the edge of town, with the centre kept clear for smaller stores to compete for trade.

“With any monopoly, you end up with whole sectors of an industry becoming bereft of labour. Walmart’s dominance of the US market has created huge food oases, with people travelling long distances just to buy food.”

Rabobank published a study this week on an EU-wide trend of retailers bypassing wholesalers. Rabo said fresh fruit and vegetables suppliers need to add value to their products — such as fresh-cut veg and/or fruit snacks rather than raw produce — or else risk losing their place in the value chain. Rabo is predicting further retail price volatility and upheaval.

A spokesman for the Irish Farmers’ Association said the group had always argued for greater transparency in the food supply chain and for a code of practice to restore equity in the chain from primary producer to retailer. He added: “If the move by Morrisons can return a greater share of the final consumer price to the producer, then we would see it as a positive move.”

Meanwhile, Irish Cattle and Sheep Farmers’ Association general secretary Eddie Punch recalled several previous attempts by Irish agri-food producers to bypass the wholesaler.

Mr Punch said: “The Irish beef trade used to supply the butcher directly; that system may have returned a better margin, but it was ended by strict Department of Agriculture rules on abattoirs.

“The potato farmer is effectively his own factor, but he is losing money hand over fist at present. In milk, there are several examples of farmers going directly into retail themselves, but it is hard to reach the scale necessary.

“If Morrisons are thinking of going into dairy farming, then good luck to them. Farms would have to be unionised, with farmers working an eight-hour day. And the kids wouldn’t have to give up their time as free labour. They’d be thrilled.”