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Worthy supermarket chain makes pigs fly

26 Jun 2012

Britain’s fourth largest supermarket could be the saviour of the UK’s ailing pig meat industry according to independent research from The University of Manchester.

The business model of Morrisons also shows it is possible to be socially responsible while remaining competitive on price with the ‘big three’ major supermarkets, say the team based at the University’s Economic and Social Research Council (ESRC) funded Centre for Research on Socio-Cultural Change (CRESC).

One reason for Morrisons’ success, argue the researchers, is that it owns its processing plants and is on track to become the country’s largest food  processor.

“The fact that Morrisons directly owns and runs its meat processing operation has helped it to reduce costs, increase profits, ensuring supply and delivering quality at a low price,” said Dr Andrew Bowman, from The University of Manchester, one of the researchers.

"Of course, premium retailers such as Waitrose, Marks and Spencer or premium ranges like Sainsbury’s Taste the Difference or  Tesco’s Finest range rely on long term contracts.

“But the Morrisons model is important because this is a different and better way which works in the mass market.

“Flexible supply agreements, pitting producers and processors against each another, is not the only way for retailers to operate if they want to deliver cheap products to consumers and profits for the stock market.

“And Morrisons has successfully increased margins and reduced costs while society has gained through reduced import dependence, stable employment and the capacity to address animal welfare and climate change.”

Morrisons as the fourth largest supermarket chain sells more British sourced pig meat than any of the ‘big three’ supermarkets.”

The overall expansion of directly owned processing  by Morrisons’ management has already made it the second largest fresh food manufacturer in the country.

It currently employs over 7,000 people in food processing and has pledged to invest over £200m in expanding its manufacturing operations by 2013.

The integrated model, say the team, is down to former chairman Ken Morrison, who built the chain from small beginnings in Bradford.

Professor Karel Williams, Director of CRESC said: “It’s not surprising that Ken Morrison felt at ease with vertical integration because he  started on Bradford market and for fifty years did things his way.

“But what is really striking is that since 2006 two outsider CEOs - Marc Bolland and Dalton Philips - retained the directly owned processing plants and invested heavily in expanding these operations.”

He added: “Other retailers will not follow suit, unless  Government plays a more proactive role in persuading them to change their business models.

“Successive governments have taken a narrow competition policy approach to supply chain problems  and policy interventions have involved a series of unsuccessful voluntary initiatives which did not recognise that the form of competition is the problem.”

According to the team, the pig meat supply chain is in long-term crisis: the size of the national pig herd has declined by around 50 per cent over ten years.

The UK has gone from 80 per cent self-sufficiency in pig meat to less than 50 per cent self-sufficiency, worsening the UK’s trade deficit and diminishes UK employment.

Denmark and the Netherlands, they say, provide over 50 per cent of the UK’s bacon despite paying their workers more double of  those in the UK.