Horsemeat in burgers – It’s been there furlong time

Posted by on Sep 19, 2013 in Business Partnering | No Comments

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All enlightened accountants know that there is more to price calculation than the just the cost and you may recall the horse meat in burger scandal a few months ago. Why would any supplier do such a thing? Some may argue that if the buyer (i.e.the supermarket) continually pushes the supplier to reduce its prices and that buyer represents a very large proportion of the overall sales then they have no choice. Their choice would be to stop selling to that particular supermarket (not an option if the buyer represents a large proportion of sales) or try and keep the buyer happy and find a way of satisfying their price point. The suppliers therefore in order to remain profitable are likely to have been forced to choose the latter option and consequently supermarkets when the discovery was made suffered serious PR damage.

I wonder if any input had ever been given from finance to maybe point out that the pressure to cut costs on suppliers could have a much greater cost in lost sales and negative publicity. If figures were able to be produced to help make the decision it could be argued that a better decision might have been made. It is interesting to note that Waitrose which is part of the John Lewis partnership and an observer of a stong ethical code had no such issues. It regularly receives awards from farming groups for its fair prices and therefore its suppliers are unlikely to have felt the same pressure and is likely to have picked up many new customers post the horse meat scandal.

Sainsbury’s were also in the news for their decision to increase their payment days from 30 day terms to 75 day terms for all non food suppliers thus imposing a 150 percent increase in the time it takes to pay them. The decision caused lots of bad press and influential lobby groups have put Sainsburys in their “hall of shame” for slow payers.

With my business partnering hat on I would hope that such a decision has been discussed in detail with a finance partner evaluating the cost impact of various scenarios and that their decision they made simply led them to now adopt similar terms to their competitors. To undertake such an evaluation would require the finance partner to be fully aware of all the influences in the retail environment and fully engaged with the commercial management team. Such skills will only be developed if finance steps out of its silo and becomes a player with other line managers rather than scorekeeper on the side

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