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Report Calls for Integrated Pig Meat Supply Chain

27 June 2012, at 11:58pm

UK - The British pig industry should follow a more integrated route to achieve better returns for producers.

A new report from the University of Manchester Centre for Research on Socio-Cultural Change says the UK's pig supply chain is in long term crisis and to turn it around the industry needs to organise itself through vertical integration to ensure the participants take responsibility for the health of the chain.

The better way, which delivers on broader economic and social objectives, is represented by the integrated national models of the Danish and Dutch pig industry) or the directly owned processing operations of Morrisons supermarket chain, which competes on price in the mass market and uses a higher proportion of British meat than any of the other major supermarkets, the report says.

"The Morrisons model aligns the interests of firm, supply chain and society through directly owned processing plants which run at full capacity and proves the benefits of plant loading," says the report.

"Our accounting research shows that Morrisons increases margins and reduces costs.

"Society gains through reduced import dependence, stable employment and the capacity to address animal welfare and climate change."

The research team, based at the ESRC funded CRESC research centre at the University of Manchester, says that the size of the national pig herd has declined by around 50 per cent over the past decade, while the UK has gone from 80 per cent self-sufficiency in pig meat to less than 50 per cent self-sufficiency.

The report says that the situation in the pig industry is a snapshot of the general economic ills facing the UK and that the situation in the pig industry worsens the UK's trade deficit and diminishes UK employment.

"This is a classic example of UK failure in tradable goods against North European competitors. The UK's growing volume of pig meat imports does not come from Eastern Europe or Asia, but from Denmark and the Netherlands, which provide over 50 per cent of the UK's bacon and produce more cheaply despite wages in meat processing, which are nearly double those in the UK."

The report calls for Government policies to recognise that ownership can lever changes in business practice by creating incentives and structures for new kinds of chain thinking.

"First, vertical integration of supermarkets with processors should be encouraged by targeted tax breaks for retailers who increase their value added," the report says.

"Second, horizontal integration should be encouraged by support for the creation of producer co-operatives and marketing assistance for artisan producers.

"These radical policies should be backed by increased powers for the Grocery Code Adjudicator to enforce contracts that give food manufacturers the security they need to improve their productivity and lower costs; and also to ban many forms of supermarket promotion which harm supermarket suppliers and do not benefit consumers."

The report has been broadly welcomed by the British pig sector.

"The report contains a number of innovative approaches to unlocking an obstacle to achieving a sustainable domestic pig meat industry which has existed for nearly two decades," said a British Pig Executive spokesman.

"While some recommendations may present difficulties politically to achieve, producers would be keen to engage.

"BPEX is investigating the possibility of a voluntary supply chain charter with retailers and foodservice companies which are genuinely working to develop partnerships with suppliers.

"The charter might contain specific tangible attributes such including clear objectives and how risks and rewards in achieving that objective are shared."