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Winners and Losers (or Should That be Runners and Riders?) in the Horsemeat Scandal

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The horse meat scandal that first hit the headlines back in January looks set to run and run. Senior Retail Analyst Antonia Branston takes a look at the retail implications of this unbridled disaster - what hurdles now have to be overcome and what long-term effects the industry could be saddled with as a result of this aw-foal mess (that’s enough horse puns –ed).

Are horse burgers off the menu?

The retailer line at the moment is that supply chains will be tightened up, customer relationships will be rebuilt and the horse burger will never cross our dinner tables again - but market forces might have a different answer to this question.

The demand for cheap food products is intense, but upward pressure on meat prices is also high. Much of the blame for the horse meat scandal has been laid at the door of retailers looking for cheaper supplies in order to maintain low price levels. Clearly, a more local, better quality and fully tested supply chain will result in more expensive beef. Ironically, this will create a demand for a cheaper alternative leading to a scenario where horse meat could become the value option. Faced with a choice between a pack of 100% beef burgers for £3.99 and a pack of ‘meatburgers’ for £0.99, many consumers will choose the cheaper option, particularly once the British barbeque season gets underway.

Should retailers be bumping up their vegetarian ranges?

In short, not particularly. Despite the fact that horse meat is not a usual part of British cuisine, feedback from consumers suggests that they are more bothered by the lack of transparency in an overstretched supply chain, the concern that the horse meat used may have been unfit for human consumption in some way and the suspicion that they have been the victims of a criminal operation. These factors have also been key in France, which is being rocked by its own horse burger-style scandal despite the consumption of horse meat being culturally acceptable there.

Consumers at the value end of the market may steer clear of some meat products for the moment, with meat-free value ready-to-cook products seeing a surge in popularity, but they are relatively unlikely to turn vegetarian on a long-term basis. Those consumers that can afford to are likely to look for meat with a better provenance, so organic and local suppliers should expect a rise in demand. Independent butchers are also set to benefit, leading to a knock-on effect on other forms of independent local shops, although this retail environment has severely contracted in the UK and Ireland, and may struggle to fulfil a significant rise in demand.

What damage will the Tesco burger do to Britain’s leading retailer?

Tesco’s response when the scandal broke was textbook - no excuses, just apologies and promises to do better. This should have put Tesco ahead of the retail pack - the problem is, the other retailers have not followed. Aldi pushed blame towards its suppliers, saying it felt ‘angry and let down’ by Comigel, Iceland boss Malcolm Walker blamed local councils for demanding low prices and, although Lidl said it was withdrawing products under suspicion and would refund customers, it stopped some way short of Tesco’s comprehensive and high profile apologies. Waitrose, meanwhile, heaved an enormous, but very discreet, sigh of relief that its own particular scandal - that some of its Essential Waitrose frozen beef meatballs were in fact partly pork - was lost among the chatter. Many other retailers have been implicated in the scandal, but it is the ‘Tescoburger’ name that has stuck.

Tesco’s latest damage limitation manoeuvre has been a video broadcast by CEO Philip Clarke. Not the most natural performer in front of the camera, he can be less than overwhelming in his executive set pieces at results time, but here his lack of slickness comes into its own and he comes across as honest and sincere. The question is, how many of the value burger customer base are likely to watch a corporate video, no matter how honest and sincere?

He was unveiling a three-point plan to recheck the supply chain and form trusted long-term partnerships, to make the supply chain more visible to consumers at every stage, and to offer alternative products to the consumer at the same price if any item was withdrawn for checking. Tesco is hoping to take the lead in rebuilding consumer trust - and in doing so ideally improve a customer relationship that had already been faltering even before the scandal broke.

Morrisons - missing a trick

There is one retailer which should be jumping for joy. Morrisons already operates a vertically integrated supply chain, owning the farms which breed the cattle that supply its beef. The chain performed underwhelmingly over the Christmas period, and the horse meat saga is a massive opportunity for the company to regain some lost ground. Morrisons should be campaigning all out on the issue, and yet it has remained astonishingly quiet. If its management fails to capitalise on this gift horse (sorry), shareholders should expect an explanation.

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