Vertical integration can save shoppers’ money, says Nielsen

Consumers could save money if supermarkets decided to increase vertical integration models for meat and pass on the savings, according to analyst Nielsen. 

Supermarkets could reduce costs and improve efficiency by pushing through tighter vertical integration of their supply chains. These savings could be passed on to consumers who are feeling the pinch as food price inflation rises. 

Mike Watkins, head of retailer and business insight at Nielsen, said that with shoppers calling for more locally-sourced produce, it would make “good business sense” if supermarkets strengthened their links with primary agriculture producers.

“Vertically integrated business models sourcing more UK product can bring savings which can be passed onto shoppers,” he said.

“This is very relevant as we look ahead to trading outside the EU in 2019, when retailers and suppliers may have to navigate around changes to tariffs and supply arrangements.”

Watkins said Nielsen data suggested two in three consumers were looking to buy more British or locally-sourced food. Retailers could tap into this demand via greater vertical integration across the wider supply chain, something he said made “sense”.

“Retailers are increasingly keen to demonstrate food provenance, as trust in the integrity of supply chain is very important,” he said.

“It’s also an opportunity to differentiate from competitors as fresh food and quality is the new battleground for market share.”

Talk of supermarkets tightening supply chains comes after Meat Trades Journal revealed Sainsbury’s was in the early stages of exploring ways to strengthen its beef base to reduce costs and boost competitiveness.

Earlier this week, the supermarket posted a 9% drop in pre-tax profits, thanks to price-cutting, wage cost inflation and the consolidation of Argos’ losses.

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