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CEOs of Arla, Kraft Heinz, and Unilever face tough questions on fairness in food supply chain

CEOs of Arla, Kraft Heinz, and Unilever face tough questions on fairness in food supply chain dairy, Dairy farming, Farmgate milk price, food inflation, Fresh Milk, labeling, Manufacturers, Mayonnaise, Pricing Pressures, Unilever Food and Beverage Business

During a comprehensive meeting that lasted over two hours, the Environment, Food and Rural Affairs Committee probed executives from major companies like Arla Foods, Kraft Heinz, and Unilever regarding practices such as ‘shrinkflation’, their relationships with retailers, and their handling of foods high in fat, salt, and sugar (HFSS). Apart from the company heads, representatives from Dairy UK, the Agricultural Industries Confederation, and the Provision Trade Federation were also questioned on various issues affecting the food supply chain.

Peter Dawson, policy and sustainability director at Dairy UK, highlighted changes in practices due to recent high rates of food inflation. He noted, “there may have been some simplification of product lines” as consumers prioritize value during inflation. However, Dawson expressed hope that consumer confidence would allow a return to a full spectrum of product offerings. He also emphasized the unchanging fundamentals in supply chain relationships and margin pressures faced by suppliers.

Dawson explained that while some dairy farmers are shielded from global pricing dynamics under certain supply chain arrangements, the majority are subject to fluctuations in global commodity prices. When questioned about dairy processors lowering farmgate milk prices during inflationary periods, Dawson defended their actions by pointing out the challenges faced due to food price deflation.

In discussions about the relationship between producers, processors, and manufacturers, it was revealed that while processors’ payments to farmers are influenced by global trends, retail prices are determined primarily by retailers. Dawson and other industry experts addressed concerns about how changes in input costs affect retail prices and consumer expectations of price reductions.

Arla Foods UK MD Bas Padberg outlined the company’s strategy to manage price fluctuations by investing in diversified production capabilities. When pressed about profits and pricing strategies, executives from Kraft Heinz and Unilever responded by emphasizing cost management and passing down pricing as a last resort.

In a focus on ‘shrinkflation’, the practice of reducing product sizes while maintaining prices, Kraft Heinz and Arla Foods faced questions regarding changes in product sizes and pricing strategies. Executives explained adjustments made to product offerings to meet consumer needs during economic downturns.

The committee discussed labeling practices, with suggestions to make changes in product sizes more explicit to consumers. While executives acknowledged consumer concerns, they indicated that labeling decisions are often determined by retailers.

The committee plans to question retailers in subsequent sessions to gain further insights into industry practices. For more information and to view the full meeting, visit parliament.tv.

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