Food prices increased, in various European countries, by more than 16% in 2022, while the price increase in developing countries exceeded dozens of times, as record inflation led to a rise in the prices of everything from bread to beans.
John Tosco Allan’s boss recently suggested that suppliers could use the situation to drive up prices. Speaking to the BBC, on whether food companies are taking advantage of consumers with the recent price hike, Allan said: “I think it’s entirely possible.”
While he admitted he had not “seen their cost structures”, he said the supermarket chain was struggling “very hard to defy cost increases” and Tosco Allan had previously refused to stock some products while haggling prices with suppliers.
With the demand for food growing and the world’s population growing, it is more important than ever to build a resilient food supply chain. New research shows that preventing a food crisis means putting justice at the heart of food supply chains.
For example, farmers and suppliers – many of whom are small and medium-sized businesses – have recently argued that they are not getting a fair price for their eggs from supermarkets and other large stores. The price of a dozen eggs in Britain has so far risen by 45p over the course of 2022, but Many farmers have only seen 5 to 10 pennies this high, according to figures released in November by the British Free Range Egg Producers Association.
Coupled with rapidly rising production costs and the impact of the worst avian influenza pandemic in history, this is putting enormous pressure on these producers and suppliers, and the current combination of rising interest rates, rising input and energy costs is generally worrying farmers.
In this environment of rising prices, these companies run the risk of further pressure on their cash flows or even production failures in the future. This can ultimately affect the resilience and integrity of the food supply chain, as well as increase waste.
Producers and suppliers can face significant power imbalances in food supply chains, which can lead to higher prices for consumers. While such companies often bear all the risks of producing and supplying items such as eggs, many are unable to bargain for On more favorable trading terms with powerful retailers.
Previous research suggests that small firms in other industries also have little or no bargaining power. In such situations, these firms must abide by the terms imposed by buyers, or risk losing income.
Supporting supply chain fairness will not only protect these companies from collapse, but will also help alleviate shortages for consumers, and can prevent food supply crises in the future.
Allan’s comments have been criticized by food companies and farmers alike, who argue that they struggle with rising costs and often don’t see the benefits of higher food prices.
Equity in supply chains
The concept of “fairness” is often overlooked in discussions about supply chain sustainability, perhaps because it is highly subjective. When evaluating fairness in an exchange, one party compares its inputs and outputs to what it believes it is entitled to.
These decisions usually come down to context, and are shaped by the nature of the exchange and any previous interactions with the other party.
While the concept of equity is rarely included in the sustainability agenda of an organization, in the context of the supply chain, the fundamentals of equity can be measured using three key dimensions:
Economic returns from relationships
How you govern decisions, as well as policies and procedures relating to relationships
The extent to which the other party communicates relevant information and openly resolves conflicts.
Based on these measures, research has produced five strategies that can help enhance the fairness of the food supply chain:
1. Reconsider the terms of trade exchange
Given the relative weakness of suppliers, it is necessary to reassess the terms of their contracts with supply chain partners and ensure that these terms allocate profits or benefits equally. In supply agreements, it is necessary to provide clear and unambiguous terms of trade. These terms of business require legal enforcement and ramifications.
2. Harmonization across the food supply chain
The supply chain may be inconsistent when it comes to the ethical values and practices of the various participants, allowing unfair practices to continue. One way to address this is to promote mutual understanding, standard practices and value among all stakeholders in the supply chain. This can be achieved through risk sharing. Building relationships, and tailored investments that benefit the entire chain.
3. Lobbying and advocacy
Suppliers as a whole need to send messages that will move relevant government authorities and agencies to take concrete steps toward implementing policy changes. These include the National Farmers’ Union, the Food and Drink Federation and the Department for Environment, Food and Rural Affairs, as well as more general groups such as the Small Business Association and the Confederation of British Industry.
4. Addressing the power imbalance
It is essential to reinstate agricultural marketing boards—the government entities that oversee agricultural production and compliance—these organizations can help put producers and distributors of agricultural food commodities on an equal footing with retailers when it comes to bargaining. Government actions, in the form of policy reviews and adjustments to existing supply chain and supply chain structures, would also help. The concept of fairness must also be incorporated into supplier-supplier relationship practices of major retailers.
5. Education to raise standards
All members of the supply chain need to be elevated
