Retailers on the Spot: Will Price Cuts be from their Own Margins?

"ICMSA President Calls on Retailers to Clarify Price Cuts on Milk and Butter Amid Concerns Over Co-op Margins"

Irish retailers are being urged to confirm whether their recent consumer price cuts in milk and butter will be taken out of their own margins or passed back to co-ops. The call comes from Pat McCormack, President of the Irish Creamery Milk Suppliers’ Association (ICMSA), following announcements from Tesco, SuperValu, Aldi and Lidl of price reductions on milk and butter. Tesco confirmed a cut in the price of a pound of butter by 40c, while SuperValu announced a reduction in the retail price of its own brand 454g butter by 40c, from €3.39 to €2.99. Aldi and Lidl also confirmed price reductions on butter. McCormack referred to this as “the obvious targeting of two key indigenous food products produced to the highest standards by farmers now facing production costs higher than the price they will receive”.

In response to the announcement from Tesco, McCormack said: “We are taking it to mean that today’s price reductions are to be financed entirely out of Tesco’s margins, which are easily large enough to absorb this cut in customer price”. He added: “Farmers will now require Tesco and other corporate retailers to confirm that this is the case and that there are no circumstances where the supermarket chains will enforce this decision and reduction on their supplier co-ops and farmers.”

McCormack expressed concern that the recent announcements from retailers had been “out of the blue” and “rushed”. He called for transparency in the food supply chain, stating that “as long as the major retailers are able to hide behind their margins or were able to dictate price backwards to their suppliers and force them to take the hit for reductions at retail level, there could be no possibility of the kind of whole sector climate transition that government policy is aimed at”.

The ICMSA President also criticised the lack of clarity around how retailers calculate their margins and the role of state agencies in ensuring transparency. He said: “No one seems to know for sure how [retailers] put their margins together and the state agencies seem to operate on the basis that their job is not to ask any awkward questions about who is ultimately paying for these price reductions or special offers”. McCormack added: “The decisions taken in the last five days put a huge question mark after the idea of sustainability that we’ve been told is front and centre. Farmers, and I would submit the policymakers, now need confirmation that these price reductions are going to come out of the retailers’ very generous margins.”

The issue of fair pricing for farmers has been a longstanding concern in the Irish agricultural sector. In 2019, the Irish government established a Beef Taskforce to address the issue of low prices for beef farmers. The taskforce was set up following weeks of protests by farmers outside meat processing plants. Farmers were demanding better prices for their cattle, which they claimed were being sold at a loss. The taskforce made a number of recommendations, including the establishment of a beef price index and the development of a code of conduct for the sector. However, progress has been slow and farmers continue to express frustration at the lack of action on fair pricing.

The recent price cuts in milk and butter have been welcomed by consumers, who have been hit hard by rising food prices in recent years. However, there are concerns that the cuts may be unsustainable if they are not passed back to farmers. The Irish dairy sector is a major contributor to the country’s economy, with exports of dairy products worth over €4 billion in 2020. The sector has also been praised for its sustainability, with many Irish dairy farmers adopting environmentally-friendly practices such as grass-fed farming.

In conclusion, while the recent price cuts in milk and butter may be good news for consumers, there are concerns that they may not be sustainable if they are not passed back to farmers. The Irish agricultural sector has long been concerned about fair pricing for farmers, and the recent announcements from retailers have highlighted the need for greater transparency in the food supply chain. It is hoped that the government will take action to ensure that farmers receive fair prices for their products, and that the Irish dairy sector can continue to thrive in a sustainable and environmentally-friendly way.

Categories: Agriculture