Dominic Moran, Professor of Agricultural and Resource Economics One of the more discomfiting sights of the Covid-19 crisis has been the spectacle of disorderly supermarket queues and shelves stripped bare of certain items. The apparent shortage of stocks has been portrayed as denying access to the least mobile and vulnerable in society including those working irregular hours on the front line of the health crisis. The dominant UK food system is undoubtedly being stress-tested, but is arguably demonstrating remarkable adaptive capacity. Yet some commentators have already concluded that it is somehow dysfunctional, non-resilient, or otherwise now delocalised to a dangerous extent. Others have extrapolated further, implicating concentrated supermarket power, and conflating current product scarcities with supply chain risks from further globalisation. These observations apparently overlook the benefits of contemporary supply chains, and are usually vague about what the alternatives might look like, or how they might cope better in response to this or some other potential shock. At the time of writing, there is no demonstrable supply-side shock, apart from accessibility constraints for vulnerable groups, food banks, and school meals, which are arguably the sphere of coordinated social care. National dietary composition is adjusting away from restaurants and cafes due to enforced closures. Production, processing, transport and retailing are all key sectors and policy is, correctly, for these to remain operational. Similarly, international trade of food products should continue to remain intact. Some effects may become manifest if labour shortages, already exacerbated by Brexit, worsen as a result of stricter movement restrictions on some 70,000 seasonal workers, usually required annually on British farms and often coming from abroad. A longer-term supply shock is not inevitable given stable global trade policies and non-catastrophic rates of illness, and if anything, supermarkets have responded to a demand spike by taking up excess labour from other mothballed sectors. On closer inspection the initial challenges arises from a highly unpredictable demand-side shock, the frequency of which can be debated. Since supermarkets assure us that the supply side looks healthy, and indeed that they are rationalising to offer fewer fast-moving product lines, a more mundane discussion might address fine-tuning the just-in-time logistics, apparently preventing retailers’ ability to fill shelves fast enough. A more interesting conversation would also focus the rationality of consumer behaviour in the face of initial and on-going uncertainty. With mixed messages from government, and alarmed by insights from other countries, consumers initially prepared by purchasing for the worst case scenario. More clarity about lock-down and continued messaging about supply sustainability has arguably allowed consumers to plan more calmly, while supermarkets can gauge whether any rationing of some products will be necessary. Any on-going uncertainty is likely to be normalised in consumer behaviours in the same way as the switch to home preparation and consumption. Put another way, if demand for some products continues to exceed supply, consumers will likely adjust product choice, food preparation and diets. We are arguably in a transition phase, but one observation for government and its Behavioural Insights advisors is that drip-feeding our way to the current restrictions did not help consumers comply with rational expectations. So what else do we learn about the resilience current food system? We already knew that the vexed question of retail concentration can cut both ways. While imperfect competition is often thought to be prejudicial to consumers and other supply chain actors, empirical evidence on the effects of market power is ambiguous, and points to a variety of market-specific factors that often limit the assumed profiteering and collusive behaviour of the dominant retailers. In fact, the current episode reveals is that supermarket power can be turned to useful affect in buffering shocks. Access to infrastructure and logistics, together with healthy profit margins, actually enable retailers to bear higher costs in order to maintain food supply in times of crisis. This has been observed before, for example in 2017 when lettuce was airfreighted to the UK from the U.S. at comparatively high costs, thereby offsetting parts of the weather-induced European supply shortage. Temporary cooperation between competitors can also enhance resilience at the expense of profits and is still subject to government regulation. Antitrust laws in the UK and in Germany are currently being relaxed so that supermarkets can stockpile and coordinate supply to consumers in a more effective way. To prevent excessive profiteering, the Competition and Markets Authority has officially warned UK retailers not to “exploit consumer fears” by overpricing products. On globalised of supply chains we have to remember that the benefit of diverse product lines come at the cost of potential vulnerability to regionally specific supply shocks, and that transnational regulation of market power is often less transparent than that exercised in nation states. However, supermarkets can and do currently exercise choice over sourcing products whenever abuse is proven. Consumers can also exercise choice with information, which arguably becomes harder to source and verify if supply chains are decentralised. While localising our food systems may be desirable to minimise some external costs, it is unclear whether shorter supply chains align realistically with consumer preferences, and whether they truly mitigate vulnerability or potentially bring non-resilience and abuse of market power closer to home. Alongside the importance of clear messaging, the current crisis is arguably revealing significant adaptive capacity in the dominant food system in terms of delivering its central function. We may not like some of its attributes, and there is scope for developing a national food policy aligning nutrition with other social and environmental goals. However, that is a separate debate to clearly delineate the social responsibilities of supermarkets, governments and consumers.
