Broken UK retail model offers Irish beef a chance

The UK is now seeing a resurgence of the independent abattoir sector which has grown steadily over the last 10 years and now processes over 70% of sheep, 45% of cattle, and 30% of pigs nationally.

This flies in the face of the dominance and growth of the large retailer sector, which in turn is served by a much smaller number of large meat processors, predominantly but not exclusively Irish. Much has changed however in the recent past. The purchasing strategy of the main retailers is to have one or two suppliers of their fresh meat and this has therefore concentrated meat processing into a small number of large processors.

I outlined the factors underlying these developments at the ICOS National Conference which had a large attendance of co-operative dairy, beef, and artisan food interests. The agrifood and rural business agenda is clearly alive and kicking in Ireland.

In the UK, the preferred choice of many British consumers definitely is to buy British firstly but only subject to a perfectly reasonable price consideration. The supermarket supplier specification is for a carcass of circa 300kg to 400kg in weight.

However, with anything up to two thirds of the carcass being sold as mince, this leaves a significant amount of high-value cuts having to find a home in the wholesale market, at heavily discounted prices.

Supermarket specification means that not much more than 40% of cattle meet requirements so the independent sector can benefit by picking up the out of spec cattle at significantly lower prices.

On another level, locally produced meats have become the new “organic” but at a much more competitive price, stripped of the hugely restrictive and costly bureaucracy around the organic movement.

Similarly, high street butchers face competition from a mixture of low cost ‘edge’ or out of town sites with cost effective direct sales to the consumer.

In truth, a British farmer that produces an out of spec carcass is discounted as heavily as an Irish-born imported animal. The reported €300 gap between British and Irish cattle ignores the fact that post ‘horsegate’, British retailers have had to pay a premium for British beef to regain credibility in terms of knowing where their product had come from. This means that UK beef is still the most expensive in the EU, so the comparison with Irish prices is not quite that simple. For the moment, UK beef is in a short-term privileged position, but whether this can last with the major retailers in such a mince dominated situation is open to debate.

I would contend that over the next few years the current large retailers will have to change their business model on beef sales. Over the past three years, the big four retailers have invested over £30bn (€38bn) in capital expenditure while sales have fallen.

Having spent all this money to go backwards, they are now embarking on attacking the bottom line with billion pound discounting to keep the discounters at bay.

The weekly shop of £120 to £150 in the out-of-town centre has now become three shops in the discounters at £30 per shop for a similar amount of produce. If the accountants of the large retailers eventually wake up to this, they too will have no option but to change their strategy to survive in a market that’s declining.

Quite simply the business model of the big four UK retailers looks to be broken.

In the face of the challenge from the discounters they must change it to survive but will this be an opportunity or bigger problem for the primary producer?

It could be an opportunity for the Irish producer as UK beef production falls. I have been asked whether this includes a significant rebirth of live exports.

Twenty-five years ago, there was no issue with live store imports from Ireland as then, the big four retailers didn’t have the power that they now have. But, as I have said, this power too could be changing so who knows where this takes us all, British and Irish alike.

n Norman Bagley is director of the UK Association of Independent Meat Suppliers. He spoke at the ICOS National Conference in Portlaoise

Supermarket specification means that less than 40% of cattle meet requirements, so the independent sector can pick up out of spec cattle at lower prices


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