Ráðunautafundur - 15.02.2002, Page 173

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Supply Chain Pressures and Increased Costs
In the livestock sector the loss of the export market for beef and live cattle and calves since the BSE
crisis and the economic difficulties of the export trade for lamb and live sheep, focused the industry on
supplying the home market. At the retail level this is now dominated by very few large supermarket
chains. Since the 1990 Food Act they have imposed their visions of supply chains onto the livestock
marketing system concentrating their purchases of meat and meat products ffom a core group of often
dedicated plants. These have developed the sourcing of stock direct from farm. In the more traditional
cattle and sheep markets, fmished livestock have been increasingly bypassing the traditional auction
market sector.
This concentration of economic power in the processing and retail sectors in the meat and livestock
industry when accompanied by lower prices has created a problem for many independent farmers in
Britain (and in other countries). A policy to resove these conflicts has yet to be found.
Additional animal health and food safety problems since 1996, particularly due to the dangers from
more virulent pathogens (such as Verocytotoxigenic E-coli), have increased the need to assure
consumers about food safety, and driven the growth of statutory inspection and safety requirements
and also quality assurance schemes. The need to introduce such schemes, together with the extra
control measures associated with BSE and the limitations on the use of by-products have increased the
industry cost base and eroded the already low margins throughout the chain.
THE MAJOR STRATEGIC FORCES DRIVING CHANGE
These can be categorised under 4 separate headings:-
• Consumer requirements
• Changes to support regimes
• Changing consumer requirements
• Global issues - WTO negotiations, EU enlargement
• Developments in the supply chain - retail, abattoir and auction sectors
I. Consumer Requirements
98% of the UK population are not involved in agriculture or food product. The factors shaping their
perceptions of the meat, and other livestock products anywhere in the world are:
• the price -cost of production
• animal welfare/production methods
• food safety
• environmental impact (including GM issues, sustainable agriculture)
• cost of support - e.g. the CAP and the use of tax payers money
• other attributes (such as taste, convenience/ease of preparation, appearance)
Rapid change and development has become the norm in both the domestic and intemational food
markets in recent years. Changes in consumer tastes and preferences, very often interpreted by the
large retailers, have sent out mixed messages to the industry. Suppliers have had to cope with
demands for more convenience and variety in food offerings in both the value for money and the
quality markets. These have to be delivered to higher standards of safety against greater levels of
compliance. With increasing consumer spending on food now occurring outside the home in the food
ser/ice sector, these needs and opportunities are also increasingly affecting the suppliers to the
catering sector.
Total meat consumption in the UK in the last twenty years has increased by over 15% to an estimated
4.2 million tonnes in 2000 (this is the consumption of beef, lamb, pig meat and poultry eaten in or
outside of the home; in addition the country consumes an additional amount of imported preserved
meat products, such as comed beef, that equates to around an additional 150 thousand tonnes a year).
Within this overall total, the volume of consumption between meats has varied with the ‘red meat’
(beef, lamb and some pig products) sector being in a gradual long term decline over the past thirty
years (with consumption of beef and veal and mutton and lamb falling by 25 and 30% respectively
between 1970 to 2000 in the UK), whilst the ‘white meat’ (poultry and some other pig products)
sector has increased its share of the market (poultry increasing by 180% over the same period and