Farmers, food manufacturers and food retailers tend to seek efficiencies within their own operations to reduce costs and grow sales. However, they should look to one another to make the next great leap foward in the agri-food business.
That was the gist of several speeches at the Value Chain Innovation Forum, held Tuesday and Wednesday in Mississauga, Ont.
Perhaps the most compelling presentation for that argument came from Martyn Jones, the group corporate services director of Wm Morrison, the fourth largest supermarket chain in the United Kingdom.
In a market where Morrisons’ 476 stores face off against some of the world’s largest retailers, notably Tesco and Walmart (through its Asda grocery chain), Morrisons sees fresh food as one of its distinct advantages. The company prepares more food in-store than any other British retailer and employs more bakers and fishmongers than its rivals.
To get the quality of fresh products it needs, Morrisons has literally reached back through the food chain to the farm. Not only does Morrisons operate its own farm in Scotland it buys direct from 5,500 farmers. “Instead of buying cuts of meat, we buy the whole animal. We buy the pig, not the pork chop,” Jones said.
Those pigs, which incidentally are raised to Morrison’s own specifications, are sent to the company’s own slaughterhouses where, Jones said, the entire animal is used in production. The best cuts, of course, are sold at the butcher’s counter in Morrisons supermarkets. But the rest of the pig is used in meat pies and other freshly prepared items.
Morrisons developed this approach, Jones explained, to maintain a predictable and cost-efficient supply. In the past, he noted, farmers grew food and “rarely looked beyond their own gate” whether his vegetables and livestock met the retailer’s needs, and thereby the customer’s as well.
By integrating farms, manufacturing and retail sales, he said, Morrisons is able to take costs out of the system and give shoppers what they want. “Each level of the supply chain is increasingly reliant on the other.”
Jones admitted that Morrisons’ approach has huge benefits and also some obstacles. On the benefit side, he noted that the company has been able to work more easily with farmers on animal welfare. Some chickens, for example, are now raised in facilities with natural light and they room to move around, with perches and straw bales to make their lives more comfortable.
But “when you take the whole animal you also have to sell the lesser cuts, which means you have to have a very good promotional program in-store to sell those cuts,” he said. “So there’s actually a close link between our agriculture program and our marketing program.”
During the two-day conference, speakers discussed a number of issues relevant to the nation’s food supply, from the importance of collaboration to increasing profitability.
“It’s important to understand why current systems are not creating the innovation and productivity required for a competitive agri-food sector and learn how businesses can evolve the value chain model,” said Martin Gooch, the director of the Value Chain Management Centre.
That organization put on the forum in association with Niagara’s Vineland Research and Innovation Centre.
Gooch, in a presentation, noted that “the level of waste we have in the agri-food business is shocking” and spoke of the need for everyone along the supply chain, from farmers to retailers, to work more closely together to know what the customer wants and to get the product right for them as efficiently as possible.
Working more closely with farmers has had a real benefit for Morrisons, Jones said. Consumers in the UK, he noted, are keen to support the British agricultural industry, which has helped the company’s sales because it promotes British beef to consumers.
Here in Canada, an example of a similar retailer-farmer relationship was cited in which Loblaw Companies worked with Ontario peach producers to grow better crops.
That partnership included a production experiment to find which California peach grower practices transplanted to Canada improved peach yields and quality. As well, interviews were conducted in-store with consumers to find out what drives purchasing behaviour of peaches. As a result, new processes were put into place.
The overall message: With consumers increasingly interested in local foods and supporting their own farmers, but not willing to pay more for food, collaboration may be the key to selling more and earning more too.