Food for thought

2009-07-29 00:00

IT is hardly surprising that consumers­ are getting fed up with food prices because we all have the feeling that every time we leave a supermarket the price that we paid for our trolley-load of goods seems to be a lot higher than it was last week.

Of course, we read all those wonderful statements by supermarket bosses that they are on our side, that they are busting their buns looking after the consumer. It all sounds so sincere until we read the business pages of the newspapers and find that the supermarket chains are the only companies that still seem to be making good profits in the current recession.

Supermarkets insist though that it is not their fault that prices are as high as they are now. Farmers say it’s not them. Manufacturers and distributors swear blind it isn’t them. Everyone is pointing fingers at everyone else.

So, just who is to blame?

I reckon the culprit is an extremely complex and expensive system that we have in this country of getting products from the producer or manufacturer to the consumer.

For example: most supermarkets just don’t have the infrastructure for a farmer to arrive with his truck and deliver food directly to the supermarket­ door. So a lot of middlemen­ have to be inserted into the system.

Add to this the fact that many of the big supermarkets insist that they do not have the staff to pack the shelves and it is left up to the supplier who has to send staff to each supermarket to actually pack the shelves.

Then those same supermarkets insist that anyone who wants them to stock their product has to chip in for advertising.

On top of this is that many supermarket­ chains will only stock products on the basis that suppliers accept that they won’t be paid for at least 120 days after delivery.

So when one adds up the cost of a complicated distribution system involving distributors, wholesalers, outside merchandisers and packers, confidential discounts and 120-day credit, it is not surprising that this all accounts for a large dollop of the cost of supermarket products.

And it goes without saying that these extra costs are not absorbed by the suppliers, the producers, the distributors, the manufacturers or the supermarket chains but by the consumer.

When it comes to things such as electronic goods and furniture, there’s the added cost impact of what the trade calls “spivving”. In simple terms, this is a cash incentive — actually it’s a backhander bribe — that is paid by the manufacturer to the salesperson in a chain store to promote a certain range of products or brand.

So when that salesperson tells you that in his or her opinion the product that is recommended is the best in terms of quality and price, back-up service and so on, there is always the possibility that all he or she is doing is pushing the product from which he or she gets the biggest backhander. The problem of spivving remains chronic in this country and the consumer is paying through the nose.

Of course, in a democratic free-market economy like South Africa none of these things are illegal. If a supermarket wants to sell a R20 tube of toothpaste for R2 000, there is nothing stopping it.

What is illegal though is when companies collude on prices and that is what the Competition Commission is looking at now. Maybe in doing so the commission will unravel the complex and expensive procedures involved in getting food from the producer to the consumer­.

But, if there is no collusion then consumers cannot point a finger at supermarkets and accuse them of ripping us off. Their objective is to make as much money as possible for their shareholders. And while this might stick in craw of the consumer when times are tough, that’s capitalism, I’m afraid. The alternative is communism.

But I reckon this status quo cannot go on forever. If something is not done to change perceptions and realities surrounding food prices, at some stage or other poorer consumers will snap and we’ll have serious food riots on our hands. Already a group in Durban is openly insisting that they will continue to steal food to survive. That’s anarchy and that could spread faster than swine flu.

This sector of the retail industry needs to stop pointing fingers and start working on ways to demonstrate that food prices are coming down. Because next time a supermarket­ group publishes healthy profits a lot of poorer people might just get to hear about it and leap to their own conclusions.

It is time for supermarkets to stop saying “we care” — no one believes that outdated marketing ploy anymore.

• Chris Moerdyk is a corporate marketing analyst and adviser, as well as a media commentator.

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