The UK may be the world’s sixth-largest economy but that economy is unable to guarantee its citizens a salad.
Tomatoes, peppers and cucumbers have been rationed in five leading supermarkets since last week following a drop in supply of about half, forcing households to opt for turnips and other seasonal vegetables instead. The chagrin of British consumers has only been worsened by helpful social media users posting images of produce-laden shelves from Madrid to Kyiv and crates of fresh salad being unloaded in snowy Helsinki.
There are multiple causes for the breakdown of the UK’s supply chain in crunchy vegetables. Bad weather in Spain and Morocco was the trigger, causing a sharp contraction in the harvest there. The country’s location across the Channel from continental Europe was another, tempting suppliers with limited stocks to spare their truckers the extra journey. Brexit red tape is an additional deterrent, and some blame can also be placed at the door of neglectful UK ministers who failed to heed warnings of domestic glasshouses shutting down because of spiralling energy costs and labour shortages.
But the supermarkets, which have kept UK food prices among the world’s lowest, must also take stock. As a proportion of incomes, UK food budgets in 2021 were the world’s third-lowest at 8.7 per cent, according to Our World in Data, after the US and Singapore. Among other developed economies, Japanese households paid 16.7 per cent and Italians 15.5 per cent; countries such as Taiwan to Sweden were well above 10 per cent.
Fierce competition among UK supermarkets, heightened by the arrival of German discounters Aldi and Lidl in recent decades, has helped keep prices low. Clive Black, of Shore Capital, says those discounters use basic goods as loss leaders to lure shoppers through their doors and away from rivals. They have not been shy of taking credit; reporting a drop in profits in September 2022, Aldi chief executive Giles Hurley said the group had “put people before profits and . . . made the right decisions”.
Yet now that inflation is high and supply chains are still reeling from Brexit and the chaos wrought by the Covid-19 pandemic, those decisions are having unwanted consequences. There is a months-long egg shortage after producers cut down their laying flocks in response to costs rising higher than the prices they receive, and those prices are ultimately set by supermarkets. Now the UK is experiencing a worse salad shortage than its neighbours — in part, industry figures say, because of the low prices its stores pay for produce. Supermarkets hardly operate on generous margins but those of fruit and vegetable growers are even slimmer: about 1 to 2 per cent, says Jack Ward, chief executive of the British Growers Association.
A cucumber in the UK costs 70p to 80p, Ward says. In France, it fetches about €1.80 (£1.59). “That partly explains why their shelves are full and ours are not,” says Ward. The recent crisis has been a test of contracted suppliers’ loyalty to the retailers, who have been reduced to calling round growers and processors to urge them to keep sending vegetables rather than favouring other outlets or selling on the open market. Not all have complied.
That same squeeze on prices has prompted UK producers to scale down their operations, some permanently. And as the salad crisis has shown, simply relying on imports is not a fail-safe strategy. Broiler chicken producers are the latest group to cut back their operations as prices failed to keep pace with spiralling costs. Production numbers are down about 12 per cent so far, according to the British Poultry Council. Retailers are so far making up the difference from Spain, mirroring the salad situation and undercutting domestic prices further. The nation’s favourite protein could become the next foodstuff to be in short supply in supermarkets.
Ministers do have some powers to intervene; they are already scrutinising the supply chains of dairy and pig meat. They have signalled a reluctance to carry out further investigations, however. Thérèse Coffey, the environment minister, angered farmers last week by refusing to attribute the egg scarcity to a “market failure”.
But this government may be replaced within two years by one much more comfortable with intervening in markets. In the meantime, the great salad shortage will not be the last breakdown of an overstretched food system. “Shoppers . . . are not paying enough for a secure and sustainable supply chain,” says Black.
Supermarkets are happy to take credit for low prices, but they must take some responsibility for empty shelves as well. Perhaps it is time to reconsider their race to the bottom.
Source: Economy - ft.com
