Sainsbury's in vertical integration beef supply trial

By Oscar Rousseau

- Last updated on GMT

Sainsbury's in vertical integration beef supply trial
Supermarket Sainsbury's has confirmed it is in the "very early stages" of a pilot scheme to test vertical integration of its beef supply chain.

Responding to queries about whether the company was exploring increased vertical integration in its supply chain, a spokeswoman for the retailer said: "We're in the early stages of a very small trial to explore new ways to increase efficiencies, while offering our customers the best possible quality and value."

Her comment came after rumours surfaced that Tesco and Sainsbury's, two of the country's biggest supermarkets, had set up working groups to explore vertical integration amid a plethora of market pressures.

Sainsbury's declined to comment further.

Challenging

The challenging retail climate might go some way to explaining the rationale behind a move towards vertical integration, though. Sainsbury's was the only one of the Big Four supermarkets where beef value declined in the 52 weeks to 10 September 2017, down by over 5% according to Kantar Worldpanel.

Tesco, Asda and Morrisons all experienced varying levels of modest growth in the same period.

Sainsbury's still has the second-largest beef market share, but Asda only needs to increase its share by 0.4% to climb above Sainsbury's, if the former remains static.

"Other retailers are definitely looking at [vertical integration​]," Charles Sercombe, National Farmers' Union (NFU) livestock board chairman, told this site. Tesco and Sainsbury's are two of the players "doing it".

Vertical integration

Tesco declined to comment. But Sercombe said he expected to see more progress in vertical integration.

"I genuinely think that Brexit will be a catalyst for change in the area,"​ he said.

"Look, there will be a percentage of the famers whom I represent that will go nowhere near that with a barge pole. But there are a lot of younger, more enlightened farmers who want to guarantee themselves a market for their stock in an 18-month or two-year production cycle. They are very keen to explore the possibilities of that, and I think that change will inevitably be driven because margins may get tighter all the way through the supply chain and I think we will all need to work together."

Laura Ryan, strategy director at AHDB Beef & Lamb, said the levy board would support a vertical integration pilot scheme, describing it as a "no-brainer"​.

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