The practice of below cost selling has brought a new and potentially terminal threat to the Irish fruit and vegetable sector, according to the IFA.
Vegetable growers cannot continue in an environment where their produce is constantly being used by retailers as ‘loss leaders’ and being offered to consumers for way below the cost of production, the association believes.
For the average grower, the cost of producing carrots is 55c/kg, 53c/unit for swedes and 52c/unit for cabbage, IFA figures show.
Meanwhile, retail promotions see these vegetables on sale for between 39-49c, the IFA argues.
The farming organisation believes that there is five key ways that below cost selling hits vegetable producers:
1. Timing
The timing of these retail promotions regularly takes no account of available supply.
When this occurs Irish growers lose out on sales to imported produce, according to the IFA.
2. Affects on Competing Fresh Products
Promotions greatly affect the sales for other competing fresh products, such as broccoli and cauliflower, whose highly perishable nature means they cannot be held over until the promotion finishes.
Regardless whether a producers product is on promotion or not, these promotions can distort the market for all growers.
3. Reduction in the Number of Growers
The trend of below-cost selling has led to a reduction in the critical mass of certain product lines.
For example, there is now only one major grower in both the iceberg lettuce and spring onion lines in Ireland, the IFA outlined.
4. Drop in the Farm Gate Price
Below cost selling has resulted in a drop in the farm gate price of some Irish grown fresh produce lines of 10-20% over the past four years, figures show.
This is directly linked, the IFA believes, to below cost of production promotions by the retailers.
5. Food Waste
Below cost selling contributes to food waste and can put smaller players in the market out of business.