Reining in the Retailers

(by Elizabeth Baines and Fiona Gooch, Traidcraft)

1. Reining in the Retailers by Simon Rawles

Consumer confidence in European retailers has taken a battering in the last few months. First the horsemeat scandal sent shockwaves throughout the continent as consumers realised they had little idea what was really going into their supermarket-bought burgers. Shortly after, the Bangladesh garment factory collapse exposed the potentially deadly consequences of corners being cut to keep costs down in the competition for high street customers.

Despite public assurances by some of the dominant European retailers that they want to improve their purchasing practices and working conditions in their supply-chains, precious little has really changed.

The food sector is a key example. Groceries markets throughout Europe are typically dominated by three to five large retailers: in the UK, four supermarkets alone (ASDA, Tesco, Morrison’s and Sainsbury’s) control over three quarters of the groceries market. This gives supermarkets enormous power over people around the world who supply and grow the food that ends up on our supermarket shelves. Suppliers wanting to access the lucrative European market have little option but to agree to whatever terms are dictated by supermarkets and compete to keep costs low – which can mean corners are cut, with sometimes tragic consequences.

Traidcraft’s research into the cashew nut supply chain shows the unacceptable impact of this price squeeze on the people producing our food.

A big price for a small nut

Cashews are a luxury treat that we enjoy in a number of ways: by themselves as a healthy snack or in products such as cakes, cereals, ready-made meals and even ice-cream. Cashews are also big business: but in the pursuit of profit it’s often the people further down the supply-chain that bear the true cost of getting this product to our supermarket shelves, working for low pay in terrible conditions brought about by the way our retailers buy.

India is one of the biggest players in the global cashew trade and processes more of these nuts than any other country. Over a quarter of the cashew nuts processed in India are sold into Europe. But only a fraction of the returns make it back to the farmers who grow the nuts and the factory workers who process and prepare them for sale.

From each bag of cashews that sells for £2.50 in a UK supermarket, less than 1p is paid to the worker in the factory. In stark contrast, the supermarket captures a whopping 41.5% of the final price. Low wages are forcing cashew factory workers into poverty, but they are reluctant to complain about pay levels for fear of losing their jobs. One worker told us that ‘if we ask […] then they say the factory will close’.

In addition to unacceptably low pay, cashew factory conditions often show little regard for the health and safety of the workers. The process of removing the outer shell from the cashew nut kernel is mainly carried out by women, who often spend all day crouched on small wooden stalls, hitting the nut with a wooden baton to break it open. The oil from the shells is acidic, and in many cases workers are not provided with gloves or other protection for their hands, resulting in blistering to the skin. The dust created as the nuts are broken open causes infections and can damage workers’ eyesight, while the roasting process releases an acrid smoke which causes nausea and headaches.

A local community worker explained how the women’s working conditions lead to health problems ranging from aching limbs, backache and diabetes to urinary tract infections: ‘urinary infections are there, skin diseases, and some of the ladies [...] get infections in personal parts’. In some cases, these infections even lead to fertility problems.  

Squeezing suppliers

The price pressure placed by supermarkets on cashew factories is huge, with European buyers demanding the lowest prices for the highest quality nuts; as one Indian supplier told us, ‘selling to supermarkets is never easy’. European importers that supply supermarkets, such as Intersnack, are regarded as ‘aggressive buyers’.

This sentiment is backed up by plenty of evidence that proves supermarkets consistently exploit their massive buyer power. For example in the UK years of enquiries by the Competition Commission found that supermarkets were passing ‘excessive risks and unexpected costs’ onto suppliers despite the existence of a voluntary code to prevent such practices. Examples included supermarkets making changes to orders at the last minute and refusing to pay the full amount (already agreed) to suppliers.

Fairer food chains: tacking on the EU

In the UK Traidcraft campaigners and others have successfully lobbied for a watchdog that can hold supermarkets to account by using strong powers, such as the ability to fine supermarkets that break the rules. This success, and the establishment of other regulatory bodies such as in Hungary, sets an important precedent: but given that every global supermarket, bar one, has its headquarters in Europe, the time has come for credible EU regulation of our retailers.

Earlier this year the European Commission launched a consultation on how to tackle unfair trading practices in food and non-food supply-chains. Traidcraft, alongside partners throughout Europe, is using this opportunity to call for strong regulation of retailers with credible enforcement body. This regulator must be both Europe-wide and, if it is to be effective in tackling supermarket buyer power, have the ability to impart meaningful sanctions, including the power to fine retailers, when abuses occur. It’s time to move beyond voluntary codes supermarkets have been shown to ignore.

Without meaningful legislation we will continue to hear stories of mistreatment and exploitation from the people working in their supply-chains, at home and overseas.  The time has come to rein in the retailers.

Join us in our campaign for fairer food chains. Visit www.traidcraft.co.uk/campaign to find out more.

Read the background to the European Commission’s consultation on tackling unfair trading practices: http://europa.eu/rapid/press-release_MEMO-13-47_en.htm

 

 

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