Handling over 4,000 tonnes of potatoes a week is a hefty challenge, and one that Branston has risen too. The company has been a major supplier to the UK’s number one retailer, Tesco, for some years now, but following a recent supply chain restructure, now handles around two thirds of Tesco’s potato volume.
The Lincoln-based company began life back in 1965 as a grower co-operative but went through a number of changes over the years, with arguably the most significant being in the 1980s.
Richard Clark, commercial director, says: “In the 1980s we recognised the growth in the supermarket sector and realised we needed to change our business, so in the latter part of the decade we built a new plant.
“In 1990, we joined Tesco, which was good as we had an expensive factory and no supermarket business, so we were quite fortunate for the opportunity.”
Since then the company has grown alongside the retailer and in recent years has made a number of acquisitions, gobbling up fellow Tesco suppliers, beginning with Somerset-based Stemwest Produce.
“They were the biggest Tesco potato packer at that time and that gave us a big leg up in terms of volume,” says Clark. “That was the start of the growth of our business through acquisition or takeover.”
In 1996, Tesco had 14 different packers, now it has just two primary potato suppliers, he says, and Branston is the largest by far.
“We took over GA Bowskill in 2000, and in July 2004 we completed the acquisition of WCF in Scotland, with whom we had an alliance for the previous three years.
“The most recent development was in March 2005, when we took control of QV Food’s volume for Tesco.”
QV will effectively continue to pack until March 2008, when its Tesco activity will cease, bringing its volume under Branston.
All in all, the business has seen considerable growth, and according to Clark, there’s one simple reason for that. “We’ve had the growth we’ve had because we’ve been focused all the way through the business on Tesco.
“We focused entirely on Tesco when all the pundits said it was the wrong thing to do, telling us it was too much of a risk having a single customer. People told us to go elsewhere, but we have stuck with Tesco and they keep giving us the growth and it’s paid off.”
However, while the business is growing well with its retail partner, it’s not immune to the issues facing the potato sector, and Clark says a big problem at the moment is ensuring the UK potato growing sector remains in place.
“A big issue at the moment is supplier confidence, or rather lack of it. That’s due to the downward pressure on retail prices and the increasing costs, particularly on things out of our control, such as fuel and energy costs. That makes it difficult and farmers are struggling like hell.”
He says that in the past, farmers had more flexibility when it came to potatoes, using other crops to prop up production. But with those other crops being less and less profitable, greater pressure is being brought to bear on the potato production.
With less room for error, farmers are now beginning to question the rewards versus the risk on potatoes, he says.
“Growing potatoes involves huge capital outlay for a long time with no guarantee of return. How do you sort that one out against the reduced retails and pressures from the supermarkets?”
With all this going on, hanging on to your best growers is a major task. “We need to be helping them to reduce their costs and giving them confidence for the future. We have to demonstrate it will get better. It’s all very well saying it will, but we need to demonstrate that.”
Failure to do that, could lead to longer term problems, he says: “We’re facing a situation where, if we’re not proactive, we could end up with a very large problem.”
A key to all this is the retail price, says Clark. “We don’t have the power to insulate our growers from the vagaries of the potato market while at the same time, we realise that Tesco has also got to be competitive on the high street as well.”
A change in attitude towards prices is vital: “There needs to be a general understanding among all supermarkets, and consumers as well, that they can’t always be reducing prices. No-one likes deflation, it’s about getting to a place where everyone is comfortable and can see the way forward.”
However, he acknowledges the situation is far from being simply black and white: “There isn’t one price for potato production. Some supermarkets sell potatoes that are cheaper to grow and may not give the best offer, but to the consumer, they look the same.”
Failure to resolve the situation could see the UK supply base dwindle, but Clark says they are not looking to shift supply abroad. “That’s not the way we’re looking as that would mean we’ve failed the UK growers.
“It would also be very tough to supply all our volume from abroad. At the moment there is not much suitable product in EU countries that could meet our requirements. Potatoes here are very different to what other farmers in the EU grow, so there would also be a huge cost in educating those overseas farmers in what we want. So it’s vital we hang onto the farmers we have.”
Despite this, he does have one warning for producers: “We’re not looking to prop up growers who are not efficient.”
The potato market is very volatile, he says, and needs to help itself. “Only around half the potato supply is grown under contract, although there are less and less farmers who are growing without an intended destination. However, there is still a proportion of the crop being grown adhoc, and there does need to be more programmed and planned production.”
Despite this uncertainty, there still remains a level of investment in the sector and innovation is still being undertaken. “We’re looking at fresh products,” says Clark, “we’re involved in a number of different projects, particularly part-prepared products.
“Tesco is aware that they don’t have enough prepared product on the shelf and they’re addressing that.”
However, investment in developing new varieties has suffered under the current economic climate. “Growers are reluctant to do commercial trials in case it goes wrong. In the past, it wasn’t such a problem, because the risk wasn’t so great and they were making money elsewhere. Now, if they set aside five to 10 acres for a trial and it goes wrong, that hurts them.”
Generally speaking though while the industry is facing challenges, Branston is confident it will remain successful, after all, you don’t become a major supplier to the UK’s most successful retail business if you’re not resourceful.
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