It is vital that supply chain relationships are positive and profitable. They need to inspire and build confidence for investment in the next generation of technology and people. Margins at all points in the chain are finely balanced, a result of fierce retail competition. The big margin opportunities generated by exceptional market conditions are invariably short lived, and will inevitably have a detrimental effect somewhere else in the supply chain. How one party behaves towards another in these situations sets the tone for the future relationship.
Volatility has created instability and stifled opportunities. To counteract this, the more progressive buyers have looked to replace short term traditional trading relationships, with long term strategic commitments. Recognising that the production timeline from seed breeding to commercial ware crop is a long and costly one, and that thinking ahead gives the opportunity to address challenges before they become costly to rectify.
Across the broader potato industry, there is evidence that times are changing. Traditionally the domain of the processors, supply contracts are becoming common practice for a wider element of the fresh sector. The previous two expensive seasons highlighting the exposure of the open market. Anecdotally there seems greater uptake by fresh growers, keen not be left out and looking to get some stability into their returns.
As the number of industry player’s contracts, this interdependency will become ever more important. For the volume potato purchasers, security of supply of the right product is paramount. For them it should be important to develop and nurture their supply base, to recognise and reward the best and most progressive producers. Allison McCain, Chairman of McCain’s, summarised why this is important:
“The relationship with customers and consumers is imperative. Consumers buy into the expected quality standard and the provenance of a trusted brand. This trust should not be broken or abused, by complacency, compromises or excessive premiums. Once trusted, they will buy more of it.”
Partnerships and collaborative relationships have been the secret of success for some. McCain’s and McDonald’s have operated a ‘beach head strategy’ for years. Planned excess capacity in one country used to establish a presence in another. Market success opening up opportunities for supply chain investment.
This ethos of collaboration extends beyond big Agri-business and food manufacturing. With little irrigation, average potato yields in Canada of 34t/ha are at a distinct disadvantage to the heavily irrigated crops from the US mid-west, where the average yield is 47t/ha. The New Brunswick Potato Industry Transformation Initiative, a collaborative venture between public bodies, academia, growers and processors, was established after realising that opportunities like beneficial exchange rates and heritage cannot be relied upon to support an industry. It needs to be competitive and this can only be achieved by improving regional productivity:
“Growers are more engaged, and prepared to try new things, the attention to detail is improving. Paying attention to the details they disregarded in the past, and are more receptive to new products and practices” says project leader Joe Brennan.
Collaborative ventures are reaping rewards in helping build potato supply chains in Kenya. Co-ordinated by the National Potato Council of Kenya, knowledge and support from European Seed breeders and Agri-businesses, the Centre for International Potato research, and government development funds are helping to establish a local supply chain that will enhance social and economic opportunities for rural communities.
For the UK potato industry there are some immediate challenges to address – the availability of labour, waste reduction, falling consumption, reduction in the list of approved chemicals, to name but a few.
We will struggle to solve these issues independently. We have to engage with our customers, suppliers, employees and neighbours. Good communication and co-operation up and down the supply chain is vital, if we are to compete with the thriving Northern European supply chains. At the end of the day integrity and mutual respect govern the quality of any trading relationship, an understanding that everyone has to make a living, and make a respectable return on their investment.