Is there any value in a £1.99 Tesco Chicken ?

Apart from grabbing headlines and squeezing margins on their suppliers, what is the value in a £1.99 chicken from Tesco ?

Tesco and free market nuts will say it is a good deal for customers, but good value for the customer should also relate to good quality and good proce for the supplier, thus making the whole process sustainable.

It appears in this case that the National Farmers Union are not keen, suggesting already that Tesco are expecting their supplier to cut the prices they charge rather than Tesco taking their own price cuts on the chin. How can Tesco get away with doing this to their suppliers ? It's called "market dominance", with no supplier being able to really stand up to Tesco.

And what of the food quality itself ? How much growth hormone, how much added water do you have to get in to a bird that much more quicjly in order to unsure that it can be sold for £1.99 ? You might be eating something labelled as a chicken, but I wouldn't be keen to describe it really as being chicken.

It reminded me of a frozen chicken I picked up in a rival to Tescos once. As I put it in my trolley a friend of mine in the Lib Dems walked past me in the store's overalls, tutted and said quietly "put it back on the shelf, I wouldn't eat that myself it it was offered for free". He then went on to tell me what the store's supplier did to fatten the birds up and how he had once been to one of the farms as part of his training. "I get my meat from the butchers in town", he added.

So to be fair, it is not jsut Tesco, but I cannot see how a £1.99 chicken can be good for anyone at all.


Quiet_Man said...

As an engineer in a sausage factory all I can say on the matter is that what you pay for tends to be what you get.

asquith said...

Vegetarianism is the way forward. Better for the environment, your body, and for that matter your wallet. There's no physical need for meat at all.

Tristan said...

Your opinion on whether people should eat it is of no consequence.

Its people who buy it who matter, if they choose to then fine. Its up to them.

As for the NFU - of course they don't like it. They represent the interests of their members not those of anyone else. They want to prevent competition and get the best for their members, no matter what else happens to anyone else.

You also contradict yourself - if it can be produced that cheaply why should farmers charge more?

You may slur me as a free market nut, but liberalism is centred around free markets (not that we have free markets, but greater interference you seem to be suggesting will not make markets freer or fairer)

Tristan said...

As for is there value - of course there is otherwise they wouldn't offer them because nobody buy them.

People buy them because for them the value of the chicken is greater than the value of the 1.99 to them.

To you or me the values are not the same, but value is subjective.

Anonymous said...

The market rules Tristan, so I guess the poor, the elderly and the sick should just sod off ?

Presumably they have nothing to offer a the market ?

Dan said...

the poor and the elderly benefit by not having to spend so much on food. An "organic" or "free-range" bird costs 300% more

Norfolk Blogger said...

Tristan, I didn't slur you , you put your hand up to it.

I mentioned "free market nuts". Of course there are also people who believe in a free market who actually are realists and realise the market does not alway provide for people, sometimes the free market just cares about itself. Money comes to money.

I am not daft enough to beleive that Tesco cares one jot for poot people.

You may well believe in the free market, good, but you put yourself in to the category of "free market nut", not I.

Oh, and when it comes to slurring, I am fascinated to know where I said talked about more intervention. You said "but greater interference you seem to be suggesting ..." Where Tristan do I say this ? I simply asked a question.

asquith said...

Additionally, a market dominated by huge corporations which intimidate suppliers is not free. Adam Smith held that view, I think you'll find.

Anonymous said...

I agree. A free market is fine, but one dominated by one company making suppliers sell for less than their production costs is not a free market and I am surprised that some nuts cannot see this.

OneHourAhead said...

Correct, we do not have a free market. In fact you will find that those espousing free market ideals are the first to rant and rave about this, and Tristan explicitly mentions it above. However, Tesco is not to blame here. It is your fault. They are only selling at those prices because people will buy at those prices. If you shop at Tesco (or Asda, Sainsburys, Morrisons, [insert bad guy supermarket here]) then you are complicit in the arrangement. If you don't like it, don't shop there - it really is that simple. Nich, do as your lib dem friend does and go to the butcher in town, go to the grocer, or baker, candlestick maker even. If people do that Tesco will rearrange their business model to attract people back again. But 20 million people shop at a Tesco each week, so they must be doing something right. They are not your mum, they should not have to decide for you what you should eat. That choice is yours.

NB Asda bought out a £2 chicken last year. It's not all Tesco's fault.

Edis said...

Firms in any economy try to draw their accounting boundaries so that the profitable results of their activities fall within that boundary and the costs are picked up by someone else.Competitive pressures are one way of limiting this tendency.

TESCO and other large scale purchasers (including FairTrade purchasers by the way) extend their logistics management chain outside their formal accounting boundary. Now, if TESCO and all purchased the chicken farms and ran them as part of their accounting system all well and good. The final price would take account of the cumulative costs along the chain and TESCO etc could decide what resources to allocate at each stage without any stage necessarily being a 'profits centre' (ie required itself to make a pro-rata commercial contribution to fixed costs as well as meet variable costs).

Because chicken farmers are in accounting terms independent of TESCO their accounts have to meet in full the fixed costs of their operations from their sales, as well as the variable costs of rearing each chicken.

So TESCO et all can pass on some of the fixed costs of production while controlling the revenue a producer can gain.

The dominant system of direct contracting to suppliers means thet there is only a marginal Free Market for sales outside the contracting system, therefore no countervailing competitive pressure.

TESCO et all are selling this cheap as they squeeze the profit margins outside their own accounting system while maintaining the margins within their system.

If they want £1.99 chickens they should pay producers a price allowing producers to operate as commercially independent units and take the hits on their own internal margins.

Charles Letterman said...

In the current financial climate Tescos should be applauded. OK, they are probably the country's biggest retail capitalists but, in February 2008, any discount on a basic food commodity will no doubt be welcomed by a majority of customers.

Indeed, supply and demand is undoubtedly a wonderful thing. But the fact is that the average consumer cares more about how they are going to feed their family on, in reality, a ever reducing budget, than whether chickens are lied to about what time of day it is. As Tescos put it, "No-one should feel guilty buying a chicken just because it is good value."

A vast majority of the population cannot afford the luxury of fair trade coffee or free range foods. For those that can, great. I hope that you and Marks & Spencer are very happy.