1. Rethinking supermarkets Andrew Bowman, Julie Froud, Sukhdev Johal, Karel Williams CRESC, University of Manchester

2. Outline Outline • The importance of supermarkets to local economies • The damage they do: the case of food manufacturing • The false necessity of the business model • Based on recent research on meat and dairy supply chains

3. Why supermarkets matter: 1 • A £1bn per week industry taking 4/5ths of household spend across key products. • Over ¾ of this goes through “big 4” • As buyers, supermarkets wield immense power to shape local and national employment and supply chains.

4. Why supermarkets matter: 2 • The largest private sector employer within the foundational economy – key influence on wages and working conditions. • A further 836,000 dependent jobs in food manufacturing and agriculture, fishing, etc.

5. The supermarket The supermarket tithe • Household spend PP remarkably stable across income groups and across regions. • Supermarkets have a licenced local monopoly to receive a tithe (in the old English sense of a 10% tax) on household spend – guaranteed stable demand.

6. Social alibi • Supermarkets social alibi = they deliver shareholder value and (superficially) low prices for customers. • Local variant = we bring you investment and jobs. • Safe from serious government intervention as long as deemed competitive: inquiries have not found collusion. • To ease tensions: Local CSR stunts, Union Jack stickers, and pictures of smiling farmers

7. The reality: extraction

8. The question: what have you done for me lately? If supermarkets take out, what should they put back in? • A bigger share of the spoils: not meaningless CSR. E.G. Hypothetical 5% Levy on smkt profit in Wales would yield over £12m = more than Welsh Assembly spend on homelessness. 2) Commitment to better local employment – e.g. living wage. 3) Supermarkets (alongside public sector procurement) are the key demand anchor that can increase local and sustainable food production initiatives … instead we have wrecked supply chains.

9. Food manufacturing: the forgotten victim … but a very big victim. • Unglamorous but employs 378,000 in 2011 (compared to 124,000 in motor vehicles, 41,000 in pharma) • Key agent in improving sustainability and working conditions. • Largest manufacturing sector by sales and prop for huge machine-tool supply chain

10. The squeezed middle

11. Sector consequences • Demand: Continual uncertainty over demand and throughput • Output: Poor capacity utilization = wasted investment = inefficiency • Trade deficit: with high wage N.Europe. • Forced irresponsibility: on labour and environmental standards.

12. Alternatives • Morrisons shows example of how vertically integrated supply chain aligns social and company interests. • Guaranteed demand = • Full capacity utilisation • Stable employment • Ability to plan for the future and invest • Ability to control sourcing and conditions (e.g. provenance, animal welfare, working conditions)

13. Morrisons vs others: Outcome • Neerock: step-like reductions in labour’s share – indicator of high capacity utilisation • Low labour’s share = funds for reinvestment, price cuts or increased profits. Unsurprisingly Morrisons is expanding VI… • The options are there and political pressure can select the outcome.

14. Conclusion • Local government needs to make supermarkets work harder for their social franchise: • Give more back in return • Act as demand anchor for local food production • Longer term / bigger picture: Disintegrated adversarial chain is a false necessity – problem is as much cultural as economic. Business models can be different - and alternatives are hidden in plain sight.