Savage Chicago style retail price cuts are suicidal
07/03/06

Yet more determined discounting by retailers has again confirmed the morale sapping chasm between the cost of turning out top grade prime cattle and the dishearteningly low returns from the market that already threaten future beef production across the UK.

So says the National Beef Association which this week is underlining the damage to beef sector sustainability provoked by yet more price reductions in supermarkets at a time when a boost in beef farmers' spirits through improved market returns is critical.

“In just four weeks over February there was a 3.5 per cent drop in the overall average price of all lean mince streams sold in Tesco, Asda, Sainsbury and Morrisons and a 7.5 per cent plunge in the value of rump steak,” explained NBA chairman, Duff Burrell .

“These crazy falls were the result of three multiples almost simultaneously heaping a £1 per kg discount on rump steak, a slash in the mince price by £1.20 kg by one company and an unbelievable cut on extra lean mince from £5.50 per kg to £3.50 per kg by another.”

“Processors too are wincing at these savage chops and one has claimed that the damage caused by the drop in mince value alone has stripped £10 million a week from industry earnings.”

According to the NBA these retail tactics are self destructive, even suicidal, because the multiples are undermining their only secure source of fresh beef by forcing even greater losses on their most important suppliers.

“The future development of the entire UK beef sector is being held back by myopic and unsustainable supermarket discounting,” said Mr Burrell.

“Retailers themselves admit that beef is the only one of the thousands of products they sell that is purchased for less than the cost of production but are still deaf to industry arguments that forward progress across the entire sector is being held back by these Chicago-style price wars.”

“Unless there are genuine and effective moves to inflate the retail value of beef it is difficult to see how the domestic industry can survive and continue to deliver what, the supermarkets themselves agree, is the standard and quality beef they want.”

“The multiples have also said they want to generate a long term increase in sales revenue by concentrating more consumer attention on top of the range quality lines sold at premium prices.”

“Unfortunately the discount disease is hitting these sections too - and with it the long term hopes of many beef farmers. Last week Sainsbury was selling its top mince brand for £6.82p kg, Asda £6.79 but Tesco, which is struggling to stitch together a suitable contract to farmers supplying its top range, was offering its best mince for just £4.20.”

“The National Beef Association will continue to try to persuade all retailers that future supplies of the beef they want can only be secured if the market gives producers enough to cover their costs.”

“But it is disheartening to see well trained and sophisticated marketeers investing money, and other resource, into developing strategies based on branding while not understanding the foolishness of consistently buying the beef they say they need for much less than it costs to produce,” Mr Burrell added.

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