Adrian Barlow is the outgoing chief executive of topfruit industry body English Apples and Pears (EAP). In this post he suggests opportunities for UK growers and supermarkets to develop closer trading relationships that would help improve returns and develop solutions to drive sales
Considering more than 80% of [UK] topfruit is sold by supermarkets, growers are highly dependent on them to reach consumers. Unfortunately, for the last two years returns to growers from all supermarkets have not been adequate and we are already seeing the negative effects of this with the reduction of the Bramley apple hectarage in England. Read PBUK’s recent article on this topic.
Unless this issue is rectified and returns are increased to a level that is sufficient to sustain businesses and provide money for reinvestment, the continued growth of production of English dessert apples will be jeopardised or even reversed.
It is important that the topfruit sector emphasises this situation to retailers and that the industry works with them to achieve the best possible results for both parties. We know that a very large number of consumers want to buy English apples; firstly, because of their taste and secondly, to support local economies, which includes not just growers but all those supplying goods and services to them.
It is very much in retailers’ interests to ensure there are adequate supplies in the future to satisfy their customers and this will be the case only if returns are sufficient. Of course, there is an onus on growers to demonstrate to their marketing companies, as well as their customers, the level of return that is necessary.
Growers should analyse their production costs and discuss them with their customers. I know sometimes there is a reluctance to provide retailers with information relating to costs and profits – but if retailers are not shown the costs of production incurred by efficient producers they cannot really be blamed if they request or demand lower prices. Of course, this does not obviate the need for skilful negotiation.
It is also important for the topfruit sector to remember that retailers are currently facing huge competition from the hard discounters, Aldi and Lidl. We have been here before in the early 1990s. Then, the major multiples were successful in seeing off the competition from the hard discounters. This time around we are seeing the major retailers implementing massive cost cutting programmes, such as abandoning the development of some sites that had been intended for the building of new stores, and reducing staff numbers significantly.
In the last few years there have been considerable changes in consumers’ shopping habits, e.g. making a greater number of trips and a reduced quantity of purchases, thus increasing retail sales through smaller stores at the expense of much larger stores. Against this background, can the major supermarkets compete – whilst incurring all the costs associated with stocking perhaps 45,000 lines in large out-of-town stores – with hard discounters offering perhaps 5,000 lines in much smaller high street stores?
The major retailers also face growing competition from Internet shopping and the possibility that Amazon will expand into selling fresh produce, with talk of drones delivering direct to consumers. Maybe some of these developments will turn out to be nothing more than talk but they represent considerable potential for new future competition.
As a result of the huge cost cutting, retailers’ buying teams are under enormous pressure. In many instances they do not have time to do their jobs as we would like them to – such as visiting stores or farms. Moreover, many buyers are appointed with very limited experience in fresh produce or of the products they are responsible for purchasing.
In some respects this can be regarded as a negative but I suggest it offers major opportunities for growers to develop close trading relationships with their customers by being regarded as a source of constructive solutions to improve performance. This can be achieved by constantly providing buyers with proposals to increase efficiencies or sales, based for instance on analyses of sales, creative promotions, more effective displays, improved merchandising, online activities, improved packs and packaging, as well as better information for shoppers.
It is important not to lose sight of the realities of retailers’ businesses. They are not owned by the state but by shareholders of various types. Of course, they have to comply with the law and with codes of practice but their primary responsibilities are to their shareholders in terms of profitability and growth and also to their employees.
However, they also need to secure the supplies that will provide them with profitable trading and future growth. They are very aware of the importance of maintaining good reputations and there have been several high profile instances in recent years of the damage inflicted by poor behaviour, misleading claims or the selling of inferior products, quite apart from the financial penalties that can be imposed by the authorities.
The Groceries Supply Code of Practice (GSCOP) has been enormously beneficial in clarifying in writing the principles of fair trading and the key obligations to suppliers. It is very much in the interests of growers that supply retailers to make themselves familiar with the requirements in the Code and what is meant by fair trading. All the designated retailers have to train their staff in relation to the Code and all of them have appointed in-house compliance officers to ensure they operate in accordance with the Code.
There is no doubt that the introduction of GSCOP and the appointment of the Adjudicator has had a beneficial effect, although a YouGov survey has shown many suppliers are of the opinion that retailers are not always complying with the Code. There are very clear guidelines in the Code about the actions to be taken by suppliers when the Code is being breached and it is important that they do so, for the benefit of their own businesses and grocery suppliers as a whole. Complaints should be raised constructively and suppliers should be reassured that the Adjudicator will protect them from any retaliatory action.