Will food manufacturers pay for Tesco’s little bit extra?
The retailer is upgrading its ready meals to include 20% more meat at no extra cost to the consumer.
In a statement issued to FoodManufacture.co.uk, Tesco category buying manager David Harman said: “This is by far the biggest and most far-reaching revamp ever made to our ready meals range.
“Shoppers will be offered superior quality dishes, including getting 20% more British meat at no extra cost.”
But industry sources have questioned Tesco’s pricing strategy, including the British Meat Processors Association (BMPA).
BMPA director Stephen Rossides told FoodManufacture.co.uk: “One of the great mysteries in life is, ‘Where do margins lie in the meat supply chain?’ The cost has to go somewhere.
Supplier squeeze
“We all know that livestock supply is tight and prices are therefore high so, unless Tesco’s going to take a smaller margin – which is hard to imagine – they will squeeze their suppliers.”
Julian Wild, food group director at legal firm Rollits, said that margins were already low on ready meals. This made the issue of who would be absorbing the additional cost of including 20% more meat at the same retail price even more critical.
He told FoodManufacture.co.uk: “Someone’s going to have to foot the bill. Tesco will tell its supply base this is a fantastic opportunity for them because they’ll get a huge increase in sales, which will sell more volume and give them an incentive to take the pain.”
Wild also questioned whether the supply base could cope with the extra demand for product at the sort of prices that Tesco was likely to want to pay.
‘Inedible’ ready meals
However, he welcomed the news that the ready meal category would be improving as many of the products were “inedible”.
“Ready meals are in a mess because consumers have got fed up with poor quality. Consumers want convenience but better quality but the processors aren’t making decent returns because too much is being sold at too low a price.
“It’s high time that something was done but whether the numbers will add up is another matter altogether.”
£50M for the meat industry
Tesco is claiming that increased levels of British meat used in its ready meal range will give the British meat industry a £50M boost.
The retailer said: “As well as improving and increasing ingredients in many of its British Italian and Finest classic meals, Tesco will also increase its use of British beef and chicken – a move that will see a massive £50M redirected to UK agriculture.”
“At the same time we will be re-directing £50M back into the British meat industry as we boost the amount of home reared beef and chicken.”
Nick Allen, sector director of the organisation for the English beef and sheep industry EBLEX, told FoodManufacture.co.uk: “I’m sure a move like this by a major retailer will be welcomed by British beef producers and consumers alike.”
The National Farmers Union was also upbeat. A spokesman told FoodManufacture.co.uk: “This sounds like good news for British livestock farmers and clearly shows that consumers want to buy British food in ready meals.”
