Thursday, June 10, 2010

Tesco baton gets smooth hand-over

Tesco baton gets smooth hand-over

Selling more food in Britain than any other company, Tesco is the largest customer of UK Farming. What happens in Tesco has a real bearing on farming and the supply trade, so when its hugely successful boss decides he has achieved his ambition of building the biggest multiple store in the country, and that the time has come to hand over the reins, it matters to farmers.
In recent years any change at the top of large corporations has involved a level of in-fighting and posturing that makes business page headlines for months. Think of the drama attached to Sir Stuart Rose at M&S, of the changes at the top at EasyJet, BP, and many others. Yet the biggest supermarket does it seamlessly, with hardly a ripple.
It's called management, and Tesco has shown the City and the rest of the economy how company management can and should be done. They have been on a wave of success for more than two decades, and in that time have continued to woo and wow their customers with the products and service demanded. The smooth change-over at the top means there's no hiccup in trading, no concerns that the direction of travel is going to be altered.
Yet the new man Clarke is no clone of Sir Terry, despite their similar background and careers. Like Sir Terry, Clarke is intensely Tesco. He joined the company in 1981, became a board member in 1998, was responsible for supply chain activities, then moved to IT and became the boss of their international operations in 2004. Like Leahy, he thinks inside boxes, uses tried and tested methods, and is averse to risk. Customers are the important people in both their lives - which may help explain their tough stance with suppliers.

Tesco and farmers
Farmers have been forced to knuckle to the terms and conditions of supplying supermarkets such as Tesco, and a book could be written on how their buying policies have changed farming.
Buying power has held prices low. The buyers have been able to dictate the market by holding intermediates such as dairy companies, fruit and veg processors and food companies to account. The farmer at the end of the chain has been given a survival price, which can only be converted into profit through rigourous farm management. The processor is always concerned that others will provide Sir Terry with a better deal, a cheaper price, and hence a better margin, and knowing that the buyer will move for a fraction of a penny.
Quality demands have increased. Together with legislation, supermarkets have demanded increased shelf life, fresher produce and slicker storage and transport, and their dominance in the market means that, in the 14 years of Leahy's reign at Tesco, there has been huge investment in packing and storage by farmer groups and supply companies.
The food business has changed. From broiler chickens to broccoli the demand for uniformity has developed the factory farm where output is as close to a Ford car production line as possible. New genetics in plants and animals have been introduced to help. Closer management of inputs such as sprays and fertilisers, of livestock treatments such as wormers, vaccines and other inputs lift their effectiveness and reduce waste.

For much of the post-war period farmers and their leaders negotiated with government, over the effective price of cereals, milk and meat. The demolition of this relationship and the substitute of retailers and processors has been a huge shift for farming, and one that has taken some decades to adjust to. The drive of Sir Terry, and others, to maximise their bargaining position, to get the best deal going, has forced change on producers like never before.

The future
Sir Terry retires at a time of further change in the relationship between the buying public, the retailer and the supplier. He sees the slow but steady growth of farmers markets, a need to become closer to the actual grower and producer from an increasing percentage of the population. Quality is being measured less in terms of physical uniformity, but in taste and provenance. Marketing is less red and blue and more green and brown. People are being led to a time when things were simpler, more rustic, but still overlayed with modern attributes of long shelf life, convenience, visual appeal.
'Local' is a powerful word in today's marketing parlance, and retail giants will be working on using and developing the concept. It will make a further significant change in the relationship between farmer and retailer, and, as always, will create new opportunities for farmers.
Practical Farm Ideas will be exploring how these can be created and developed, and we'll be looking for case studies and examples for farmers to follow.

If you liked this article you might be interested in:
Supermarket trading practices are 'Big Boys Game' - PFI Vol 18-4

Tuesday, June 08, 2010

Reith Lecture lacked bite

Summary: was there an original thought or opinion in the 45 mins lecture?

Reith lecturer created hardly a ripple
The BBC Reith Lectures have that revered slot in the annual programming which eclipses all else. Today we had the second in the series presented by Professor Martin Rees, President of the Royal Society and Astronomer Royal whose title was Surviving the Century.

Food and energy played a big part in his analysis, as well as population and pollution. His arguments have been spoken before, by the Government Chief Scientist Prof Beddington, and Lord Stern who, in a report published last year, said we should give up meat.   This year's Reith lecturer clearly likes science, and GM crops, citing their benefits. He doesn't like populations that are expanding quickly, or the American way of life which if repeated across the globe would create untold damage. What was surprising was the lack of a call to action. Research, international cooperation, controlling fanatics who threaten scientists and research, but no mention of targets which need to be set. 

No mention of biogas
His views on energy generation are very pro wind power and also tides, including a Severn barrage. He's quite pro nuclear. But not a mention of biogas, which in our view is the wasted resource of the modern era. 

The role of farming across the globe was hardly touched on, despite the fact that it is farmers who have the task of producing most of the food needed for survival. So GM was applauded from a scientific viewpoint, rather than a practical and economic one.  It would have been interesting to discover how he viewed the prospect of a farming industry being dominated by a few major companies, in much the same way as oil is today.  Companies that provide the seed and the semen, the feed and fertiliser and also provide the marketing and the distribution. Creating food commodities that are traded and processed in much the same way as petrol, where big hitters at the top of the pile can skim off a useful percentage of profit for themselves. 

These companies and those employed by them will be in a position of huge economic power, controlling the activities of millions of the world's poorer people, and being part responsible for the ecological balance of the planet. Farmers may well find themselves unable to operate outside this system, either because they need the essential inputs to make things grow, or because marketing privileges will be available to members of the club - ie customers of their seed and chemicals.

Professor Rees's future doesn't include such events, neither does it remark on the growth of giant distributors which effectively control the markets for food and other essential commodities. They too have a potential, and existing power which effects the actions and lives of thousands of farmers and growers. 

We listened to the Reith Lecture with all the reverence required for the occasion, increased by Sue Lawley's deferential introduction and presentation. She was broking no argument and no criticism from her audience, who were there to adore and admire, not to probe and enquire. 

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