Your shop lives in an integrated supply chain

A few independent retailers may have taken some pleasure from the grocery supply chain’s problems with horsemeat. But there are very few that can really claim to operate outside the supply chain, which is focused on delivering a certain amount of protein at a predetermined price.

Most retailers have to accept they have little control over what is in the goods they sell and that shoppers’ needs will be principally determined by who lives near their stores. They need to differentiate themselves by being sure what values they hold and being true to them.

When looking at a major supermarket, many people see a retailer. However, what really gives supermarkets their edge is that they have an integrated supply chain. They are wholesaler and distributor, too. And in some cases even the farmer!

Over the past two decades, the power of the supermarket procurement teams has risen and risen. They decide what price they want to sell food at and then challenge the supply chain to deliver the solution. Even innovative new food solutions that come into the grocery channel face margin erosion from the moment someone can make an approximate copy.

Last week, I was talking to a brand manager who launched a frozen lasagne product 20 years ago. He said that he would be surprised if anyone knew what was in the box. In the first 18 months of the product’s life, the recipe was consistently reformulated to maximise profit. Teams of people were involved. Across the 20 years since he worked on the product, constant tinkering and reformulations in response to changing commodity prices would have taken place. Most remarkably, he recalls at launch the product sold at £1.59. Today, two decades later, it sells at £1.29.

This supply chain is for the most part the same supply chain behind your store. I suspect most of your suppliers have been very quiet, which suggests they don’t believe they have a competitive advantage on horsemeat.

But do shoppers care? A poll by researcher Kantar shows the answer is that many do not. It asked more than 6,000 people whether their shopping habits would change, and 47 per cent said no. Perhaps many think they are not buying cheap food and so they don’t need to change.

But a follow-up question found that a third of people said they would continue to buy processed knowing there was a chance it contained horse. If that is the level of public concern at the height of the crisis, then behavioural change is likely to be slight. Frozen ready meal buyers are unlikely to be queuing up in your shop asking for something new… even if you have it.

The final point to make is that you need to be true to your values. If you worried about the provenance of what you sell before the crisis, then you should be able to reinforce your values in the minds of your shoppers. If concern about provenance was on your ‘nice to have’ list before, perhaps now you can do something about it. There may be an opportunity if you have the right type of consumers local to your shop. But there is no bandwagon to jump on!