Despite statistics from the Office of National Statistics (ONS) revealing that the retail prices of beef, lamb and pork rose between July and August of this year, the figures are still lower than a year ago, highlighting some of the current challenges in the red meat supply chain.
“Compared with a year ago, the retail price of beef, lamb, pork and also chicken are all lower,” Stuart Ashworth, head of economic services at Quality Meat Scotland, commented.
“Pork and chicken fell by more than 5%, with beef and lamb showing a lower decline of around 2.5%. Perhaps these retail movements should not come as a surprise with the information relating to the UK’s major multiple retailers that continues to emerge,” Ashworth said.
The growth of Aldi and Lidl based on a low-price business model is well documented and the major retailers have responded to this competition by cutting prices.
At the end of July, Morrisons indicated it would reduce the price of 1000 products by an average of 18%. Among the cuts mentioned is a reduction of more than 20% in the price of beef mince, an even bigger cut in some poultry products and reductions in some processed meat products like ham and cooked meats.
Other supermarkets have also been reported to be taking similar steps to cut meat and own brand products to remain competitive.
“While cutting retail prices does not necessarily mean that the multiple retailers will pay less to their suppliers, it is difficult to see how they could pay more,” said Ashworth.
“With the farmgate prices for prime cattle, sheep and pigs all higher than they were 12 months ago, the squeeze in supply chain margins beyond the farmgate quickly becomes apparent and an abattoir’s ability to pay year-on-year price increases to producers becomes compromised.”
Selling to food processors who use meat as an ingredient in ready meals and other products can also bring about challenges, Ashworth observed.
“Food processors, like primary processors, have many high street retail customers and so face the same challenges in maintaining margins on sales to supermarkets. However, with sterling weakness lifting the price of imported manufacturing meat, abattoirs will find less pressure from low priced imported raw material among food processors,” he said.
This story was originally published on a previous version of the Meat Management website and so there may be some missing images and formatting issues.
