THE NFU yesterday urged Tesco not to squeeze prices for its supplier farmers as competition grew from discount supermarkets.
At a dairy conference jointly hosted by Tesco and Robert Wiseman Dairies at Stoneleigh in Warwickshire, Richard Macdonald, director-general of the NFU of England and Wales, said confidence within the Tesco Sustainable Dairy Group (TSDG) was being te
sted.
He voiced fears over Tesco's introduction of "Fresh 'n' Low" milk and its policy on sourcing cheese. Macdonald said: "I understand that Tesco wants to provide value to its customers in a testing economic climate and will be concerned at losing market share to the discounters.
"However, I'm am concerned by the claim that this move (introducing Fresh 'n' Low] will not be felt by the TSDG.
"While for now the core TSDG farmers are protected by their contract, the impact of this move on farmers' confidence, when they are still adjusting to being in a relationship with a retailer, cannot be overestimated."
He added: "While we have seen great progress for liquid milk I want to see Tesco extend this responsibility into cheese and other dairy products. This includes sourcing more produce, especially own-label cheese, from Britain."
Macdonald said Tesco had "gone further than any other major retailer" to link its prices to production costs. But he added: "This does not mean there isn't room for improvement."
The cost of food in real terms had until recently been falling for at least two decades. But prices have risen in the past six months and consumers are beginning to shop around.
Sue Fisher, a senior market analyst with the Agricultural and Horticultural Development Board – formerly the Meat and Livestock Commission – has just published a detailed paper that highlights the changes.
The background of Fisher's report lies in the fact that during the 12 weeks to mid-August UK consumers spent almost £13 billion on food and drink with the major retailers – up 7 per cent on the same months of 2007.
Ominously for Marks & Spencer's shareholders and its chief executive, Sir Stuart Rose, Fisher reports that M&S's food and drink sales slipped by 7 per cent. That is not good news, given the fact that M&S is a major supporter of Scottish farming.
M&S may be down, but not the discounters, according to Fisher. She said: "Over that three-month period to 12 August, the largest sales increases were recorded by the discounters Aldi and Lidl, along with Netto.
"Their combined food and drink sales rose by 22 per cent, compared with their total till-roll sales growth of 14 per cent."
The discounters still account for only about 5 per cent of all food and drink sales in the UK. But that scenario is changing fast in the view of Fisher.
"In the space of just six years, the number of discount food stores in the UK is estimated to have risen by more than 40 per cent. The first Netto and Aldi stores opened in 1990.
"Lidl, which is still a privately-owned Germany company, followed in 1994 and expects to have at least 500 outlets in the UK before the end of this year.
"That company's philosophy is to sell a premium quality product at the lowest possible price: that policy resulted in a Which? award for the best value-for-money retailer."
Tesco has the lion's share of UK consumers' spend on food and drink, with a 27 per cent slice of the market. Sainsbury's has comes next with 15 per cent, followed by Asda on 14 per cent. Morrisons has expanded sales to the extent of seizing 11 per cent after a difficult period when it absorbed the Safeway operation and rationalised its outlets.
The full article contains 631 words and appears in The Scotsman newspaper.
