QMS outlines red meat chain challenges
Quality Meat Scotland (QMS) says the challenges facing the UK food retail sector are illustrated by the announcement that Co-operative will cut the cost of over 200 of its own brand food products.
The British-sourced meat and poultry products will be cut by an average of 10% but up to 50% in some cases.
This also highlights the challenges faced by the processors who are working with multiple retailers, in terms of their ability to pass on the cost of raw meat or, conversely, their ability to pay more at the farm gate, according to Stuart Ashworth, head of economics services with QMS.
Ashworth explained: “The good news in Co-op’s announcement was a commitment to make greater use of British lamb in its retail offer and a declaration of growing grocery sales. Some of this growth is based on the growing trend for ‘little and often’ shopping that the smaller convenience supermarkets benefit from but who in turn tend to have a smaller range of meat and meat products available.”
He commented that during 2015, the average farmgate price for beef cattle was 6% lower than in 2014. In contrast, the average retail price for beef was unchanged, though mind price did fall by 2%. The challenges retailers further up the train is that they could drop prices without jeopardising farm gate price by taking a smaller margin on the meat they sell.
“A similar scenario is revealed for lamb where the farmgate price has fallen 10% between 2014 and 2015, while the retail price has increased by 2%,” continued Ashworth.
“This however hides the fact that the lamb retail price movement since 2013 has not matched the overall increase in farmgate price for lamb in that period. In other words, lamb retail prices remain great value for money when considered alongside the movement in farmgate prices since 2013.”
The change in movement between retail price and farmgate is even more pronounced in the pig sector where farmgate prices fell 18% between 2014 and 2015 on average, while retail pork prices only fell 3% and bacon prices 4%.
Ashworth says that basic comparison between retail and farmgate suggests that scope exists for retail prices of beef and pigmeat to fall without impacting on farmgate prices.
Ashworth added that the prevailing intense price competition in the multiple retail sector suggests there is unlikely to be much strengthening of livestock farmgate prices in the short to medium turn.
“The current market situation does, however, highlight the continued importance of working hard to differentiate the Scotch brands in the marketplace and promoting their quality message and what sets them apart, to UK and global consumers. By doing so our industry will continue to benefit from the opportunity to achieve a premium price,” he concluded.