Colruyt wants to shorten its supply chain and make it more transparent by buying beef straight from livestock farmers, who will receive better prices as a result. Meanwhile, competition from foreign meat increases.
By purchasing the meat straight from the farmer, Colruyt will have more control over the supply chain, but it also means that livestock traders and meat wholesalers will be passed by, and they're not happy at all with the retailer's initiative. "It's as if you have to sell your soul to the devil. Mass distribution has always put pressure on us. Livestock farmers don't earn enough money and that's not because of our margin of two percent," says Benoît Luyckx, spokesperson of the Flemish livestock traders and meat manufacturers.
According to Colruyt, the revenue earned by shortening the chain will in fact end up with livestock farmers in the form of better prices for their wares. "Colruyt is only trying to find a solution for the precarious situation of livestock farmers," says Stefan Goethaert, managing director of Colruyt Group Fine Food. He mainly refers to the increasing competition from foreign beef, mostly from Ireland and Latin America.
Roel Vaes, meat cattle specialist from the Farmer's Union, does like the system. "It's a different form of market organisation, which could grow. More than a few farmers will be interested as the system offers them a better price. Will that price cover the total added value? We don't know, but from now on, farmers will be aware of what Colruyt pays and they'll get a clear view of the cost of slaughter and transportation."
The project will take off with ninety farmers who will be supplying about ten percent of all the beef purchased by Colruyt Group. The farmers will have to unite in producer organisations, since Europe encourages that through grants. For now, the retailer will be collaborating with a Flemish producer organisation as well as two Walloon ones, but it's possible the system will be expanded quickly.