How supermarkets keep the prices high

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Indy Lifestyle Online

There is little doubt Britain is among the fastest-growing organic markets in Europe, with the value of sales increasing nearly four times since the mid-1990s. This has even been outstripped by a nine-fold increase in the area of land devoted to organic farming over the past seven years.

There is little doubt Britain is among the fastest-growing organic markets in Europe, with the value of sales increasing nearly four times since the mid-1990s. This has even been outstripped by a nine-fold increase in the area of land devoted to organic farming over the past seven years.

Yet, despite these impressive figures, the prices paid for organic food remain high and refuse to fall in response to increasing demand. Why is this, and are consumers being seriously overcharged?

One possible explanation is that sales of organic food still account for a relatively small part of total food sales, between 2 per cent and 8 per cent. Organic consumers are seen as a niche group, willing to pay more for these products, and the major retailers are happy to oblige.

A second and far more important reason is the power and policies of the major supermarkets. Reporting among the highest profit margins for food retailing in Europe, our supermarkets account for between 70 and 80 per cent all UK organic sales.

They control the organic supply chains and treat organic food like any other product range, sourcing from wherever possible and pushing down farm-gate prices.

Unsurprisingly, more than 60 per cent of the organic food consumed in the UK is imported. Although supermarkets are keen to be seen supporting the growth of home production, they are "adding value" and keeping retail prices high, not the organic farmers.

Paradoxically, in some organic sectors such as milk and lamb, farm-gate prices have been falling in response to over-supply. The supermarkets, which control most organic sales, have the power to keep consumer prices high and put downward pressure on farm-gate prices.

Of course, consumers can buy organic produce directly in farmers' markets, farm shops and box schemes, and help ensure farmers get a fair price. But most consumers prefer convenient, one-stop shopping, which allows the supermarkets to flex their muscles.

The Government has provided financial assistance to help farmers convert to organic, but this will have little impact on prices unless they also control the processing and retailing. Is it time for a code of practice that stipulates supermarkets have to pay a fair price to farmers and charge lower prices to consumers?

 

Brian Ilbery is professor of geography at the University of Coventry

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