MarketLine Blog

Is a Public Preference for Cheap Food Behind the Horsemeat Scandal?

On January 16th, the Food Safety Authority of Ireland said beef burgers with traces of equine DNA were being supplied by subsidiaries of the ABP Food Group. One product was found to be classed as 29% horse. The finding resulted in ten million burgers being taken off the shelves of retailers including Tesco, Lidl, Aldi, and Iceland. Over the next week, Burger King switched supplier from ABP Food Group as a precautionary measure, while Sainsbury’s, Asda, and the Co-op removed some frozen products from their shelves, though none were found to have been contaminated with horsemeat. More recently, frozen beef lasagnas made by Findus were found to contain up to 100% horsemeat.

These findings have had significant effects on both food producers and retailers. The Guardian reported, on the 26th February, that sales of frozen beef burgers had decreased by 43% since the horsemeat scandal broke. Additionally, in the first four weeks to 17th February, Tesco suffered its worst monthly fall in market share for over 20 years, though this may be down to Tesco having fewer big promotions than a year ago. However, Morrisons revealed that their fresh meat had seen a boost in sales, and Riverford Organic Farms said sales in the past four weeks were up 41% compared to the same period in 2011.

The horsemeat scandal has raised serious questions about the increasing prevalence and preference for cheap ready meals. Professor Mike Leavn, Chair of Nutrition in the School of Medicine at the University of Glasgow, says “perceptions of busy lifestyles and time-scarcity have resulted in a shift away from traditional family meals towards convenience foods…“. Additionally, the recession has driven the price of certain foods up. Data compiled for the Guardian showed that the consumption of fat, sugar and saturates had soared between 2010 and 2012, while the consumption of fresh fruit and vegetable dropped in most households.

According to the European Commission, the price of beef and veal has risen by more than 45% across Europe since 2008, though the increase in price of ready meals does not reflect this. According to the Office for National Statistics, 24% of British household expenditure was on food and non-alcoholic drinks in 1963, compared to 9% in 2012. Richard Dodd, Spokesman for the British Retail Consortium, says “food is cheaper in real terms than it has ever been. But it has become so affordable because we’ve become much more efficient in agriculture, production and retailing.”

Peter Hardwick, head of trade development at Eblex, the English beef and sheep industry body, says that meat producers, who operate at profit margins of 5% and under, face financial pressure. Retailers, by comparison, operate at double-digit margins. He believes this may have contributed to the problem. The global auction price for beef is now $5,300 per tonne, compared to horsemeat which is $1,200 a tonne. Hardwick says, “it is clear that rising beef prices and the relative cheapness of horsemeat have led some people to see the potential for making big profits through fraud”.

Since the horsemeat scandal broke, Britain and Europe’s regulation of the meat industry has been criticized. However, the scandal may lead to tightened regulation and increased testing. Boss of Tesco, Philip Clarke, has acknowledged that trust in the industry has taken a hit, and promised fewer imports of meat from other companies and the introduction of its own system for testing products.

However, the horsemeat scandal is far from over, with British farmers recently raising concerns as neither retailers nor the government have been clear as to who may bear the cost of tougher regulation.

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