Mitigating higher costs for consumers while ensuring food supply chains remain sustainable is a fine balance, says Co-op Food co-managing director Matt Hood.

Co Op Milk

Co-op has increased the amount it pays farmers for British milk

The Co-op is Britain’s oldest supermarket business and we can trace our roots back to 1844. Although much has changed in the more than 170 years that we’ve been on the high street, history serves many a warning and offers food for thought in such challenging times.

The 1840s were known as the ‘hungry forties’. Britain experienced an economic depression, causing much misery. There was a serious slump in trade, leading to a steep increase in unemployment, accompanied by a bad harvest.

Fast-forward to 2022: Covid is having lasting impacts, we have war in Europe, face high inflation and talk of a recession.

Today from our energy bills to petrol pump prices, groceries and Council Tax to mobile phones are all rising in cost. Food insecurity is a reality for many, and with record levels of food inflation, the fear is that this will only get worse.

The causes of the rises in the food sector are complicated and make it difficult for businesses to control in order to protect the consumer.

Flooding, war and driver shortages

Heavy rain and flooding on the Continent have slowed harvesting, and we are working hard to deal with the supply challenges brought about by Russia’s invasion of Ukraine.

Our lorries need drivers and fuel. Both have been in short supply. If the cost of distribution increases, so too does the cost of goods on supermarket shelves.

Food production is also energy-intensive. Farmers have been hit with increasing costs to heat greenhouses, while fertilisers need huge amounts of energy to be produced.

Brexit and Covid have meant fewer European workers available for picking, and wages for these workers are rising.

Commodity prices remain extremely volatile. The price of raw materials has risen due to escalating transport and distribution costs, and that inflates prices.

“Food costs much more than the numbers printed on receipts at the checkout suggest, and many farmers would argue the price you see on the label doesn’t cover the cost of production”

Before Russia invaded Ukraine, there was little significance read into the proportion of the world’s wheat supply or sunflower oil that they produced. The longer the war goes on, the greater the effects.

All this means higher prices on farms, which unfortunately means higher prices in shops.

With food inflation rising, there’s an obvious call for supermarkets to act and the government to intervene.

In response, some supermarkets are making price promises to underline lower prices. Yet, we have a responsibility as retailers to understand and appreciate that by doing the right thing for customers someone has to lose out in the cost equation of producing food.

Food costs much more than the numbers printed on receipts at the checkout suggest, and many farmers and producers would argue that the price that you see on the label doesn’t cover the cost of production.

Tackling a perfect storm

At the Co-op, we will always continue to explore ways to mitigate increasing costs for consumers while ensuring our supply chains remain sustainable. It’s a fine balance but one that is our responsibility to seek.

It’s in our DNA that we also want to continue to do the right thing, such as sourcing 100% British meat, supporting Fairtrade farmers and producing cruelty-free toiletries and household goods. For this reason, we’ve increased the amount we pay our farmers for British milk and we’re looking at a new, fairer pricing model for pork and chicken, given the well-documented pressure these sectors are experiencing.

As we grapple with how best to tackle the perfect storm of issues that households, industry, government and world leaders face, the rise of the concept of cooperatives and cooperation offers a solution.

The Co-op started out to tackle a very real problem of tampered foods. We were established when food prices were very high and many shopkeepers bulked water to milk, chalk to flour and gravel with oatmeal, or added weights to the scales so that customers did not receive the amount of food they had bought.

People joined together to right a wrong and do what was right in their community. Cooperation was a simple concept. The ultimate aim was to change all production, distribution, education and government to cooperation.

They knew that a world based around cooperation would be a much fairer place.

That seems as relevant today as in 1844, and I hope it’s a concept that commercial teams heed to ensure consumers and producers alike get a fair deal.

Retail Week Live 2022

Don’t miss this year’s Retail Week Live 

Jo Whitfield, Chief Executive of Co-op Food, will be speaking at this year’s Retail Week Live.

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