| Initiative on Food Marketing Here we present the full text of the Executive Summary from our Report for the Initiative on Food Marketing. You can also download this document as a Microsoft Word 6 file: ifmexec.doc (approx. 24KB) Note: If you have Microsoft Word on your computer the file may be opened within your browser window. To prevent this right-click (Cmd-click on a Mac) on the link and use your browser's 'Save link as' or 'Save target as' command to save the file to your disk. Executive Summary The Initiative on Food Marketing (IFM) was set up under the Chairmanship of Sir David Naish, as a result of meetings held by the Prime Minister to address the UK Food Trade Gap. This study, commissioned by MAFF, on behalf of the IFM, is concerned with whether there is a need for more collaborative marketing at farm level and, if so, to identify the barriers to such collaboration. Furthermore our task has been to recommend how such barriers might be minimised or overcome in order to enhance the development of the most effective and competitive structures for the marketing of primary production. Approach The approach which we have taken in this study has been to identify marketing need at each stage in the supply chain and, particularly, to identify how well current farmer marketing structures meet these needs. To do this we have conducted personal discussion throughout the food chain using a variety of methods i.e.
In addition, we sought written responses from all the main trade organisations. Finally a certain amount of published data was reviewed; as were relevant reports. Accordingly we are confident that fully representative views from across all sectors and at every level in the food chain have been obtained. We are grateful for the excellent co-operation and frank discussion which we have enjoyed in the conduct of these discussions. Key Findings There was a uniform and consistent view throughout the food industry that greater collaboration on marketing at farm level is crucial to the commercial development of the primary production and processing sectors of the UK food industry and to ensuring that consumers and retailers obtain market driven responses from the farmer so that products of the right quality, consistency and specification are delivered into the food chain. In our discussions with retailers, the rapid developments in partnerships with their suppliers (and the significant concentration of supply that this implies) were emphasised. A further point which emerged was a difference in policy regarding communication with producers. Some are adamant that direct rapport is vital while others consider that this should principally be the responsibility of the processors. However all were agreed that producers must be market led and must play a fundamental role in the development of supply chain alliances and partnerships. Among processors, it was agreed that the Virtuous Circle of continual product enhancement in response to consumer needs, market trends and competitive pressures is indeed sustainable. However, it demands a high level of rapport with the customer and suppliers must be responsive too. This in turn means that producers (farmers) must have structures which facilitate such involvement (and many do not) and this, in turn, will inevitably lead to greater disciplines being adopted at farm level in response to the market. Processors also felt that existing Marketing Groups are, in the main, insufficiently market led, too small and not professional enough. It should be said however that the Fresh Produce sector is significantly more advanced in all these aspects than most of the rest of British agriculture. It was therefore apparent that the retail and processing sectors consider that the fragmentation of farm marketing is indeed a barrier to the optimum development of the food industry. The workshops with existing Marketing Groups (of farmers) showed that many of these are not yet involved in alliances (again the fresh produce sector is substantially more advanced) and the adversarial rationale upon which many were initiated is still a major part of their culture. Furthermore, this can lead to the farmer members believing that they are the customer of the Marketing Group rather than a supplier to it. The need for scale to meet the current needs of the food chain is starting to be recognised by the existing groups (many of which are co-operatives) but there are problems of structure and culture which seem to make it more difficult than in a plc environment to address the scale issue. The farmer Focus Discussions demonstrated clearly that the majority (NB these discussions were with farmers who are not part of any collaborative marketing) are still production oriented. Furthermore, many are sufficiently independent and wealthy to feel that they can afford to ignore the need to be more market-led. For many too, the past failings of marketing co-operatives are a salutary memory and this makes them cautious. A further factor cannot be ignored - many farmers are antagonistic towards what they see as the power of the major retailers. From all these discussions with farmers, it was apparent that their understanding of what is really happening in the market is limited and that which they have seen they are nervous of or are opposed to. Finally, few of these farmers have a good grasp of the competitive threats which the future could bring in the form of overseas suppliers. In almost every sector of agriculture, somewhere in the world someone can do it substantially cheaper than we can in the UK. (e.g. lamb and milk from New Zealand, pork from USA and apples from Chile). As multinational companies develop global sourcing, as world trade liberalisation becomes a reality following GATT and as agricultural support is reduced, so the need for farmers to become fully involved in supply chain alliances and partnerships becomes paramount to meeting this competition and to ensuring long term market security. Marketing collaboration on an appropriate scale therefore becomes all the more crucial. Recommendations From all our findings, a large Reality Gap between market demand and producers’ understanding of this demand has become increasingly apparent. Farmer fragmentation is indeed costing the UK food industry and, unless addressed, this cost could escalate and the market security of British farmers could become more risky. Action to meet these challenges is needed. Collaboration is indeed an imperative. Our recommendations fall into three areas:
Leadership of the highest order is needed to explain why collaboration is so important and to ensure that a co-ordinated approach is taken. It is therefore recommended that someone must take the lead role and must orchestrate the actions of all the stakeholders. As the IFM has stressed, it will be important to use innovative forms of communication of these vital messages so that not only are they transmitted to, but are also heard by, those who are not yet convinced. The report sets out some detailed proposals for the development, management and funding of an appropriate campaign and the kind of resources it will require. We suggest that more light needs to be shed on how British supermarkets work and how rapidly consumer needs can develop. The anxiety which many farmers feel is real, even it is not well founded. It is recommended that, as well as the communication between processors and farmers, more direct retailer to farmer communication would be particularly persuasive (we recognise that there are already considerable efforts being put into this - their very effectiveness and the degree of farmer anxiety is the very reason why this enhanced effort is proposed). Such an effort would add considerably to farmers’ understanding of why change is needed. Finally, various forms of leverage to encourage more and better collaboration are put forward. These can be used particularly where public assistance is provided, such as via the Marketing Development Scheme. Leverage factors include operating scale and structures, vertical linkage within the food chain, cost competitiveness and feedback of results to measure the aggregate effect of such assistance. The report considers that the current resource from external sources (principally £2.5m/year from MAFF’s Market Task Force) to implement these recommendations is inadequate for the task and recommends that this needs to be trebled in real terms. Options for the provision of such funding are also proposed but it is for the industry to decide which of these, and to what extent, is the most appropriate. Conclusions The report concludes that the lack of collaboration in farmer marketing is a major concern and that, unless tackled, the magnitude of this concern will grow as overseas competition to supply the UK market intensifies - particularly as international trade liberalisation takes effect. Co-ordinated leadership of the highest calibre to explain why farmer marketing must change is required and the concerted action of all the stakeholders is called for. Innovative means of communication and education must be employed and success stories must be widely publicised. This will take significant additional resources and real energy. Hence, the Collaboration Imperative is a must not a maybe if consumers’ needs are to be fully met and British agriculture’s home market is to be secured for the long term. |
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PMS - Call David Thelwall on 01765-602514 or send an email.
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