The Horsemeat Scandal and a Tin of Varnish.

Ronseal products have a strap line claiming that it does exactly what it says on the tin. Buyers of Ronseal products probably believe it is true. If it claims to be a clear varnish that dries in an hour, then that is what consumers believe. Very few will want to know where it was made or even who made it. It represents a kind of trust between the business and the consumer.

So just how much can we really trust product strap lines, labels and the products in the packaging? Well it seems for many processed meat products we simply can’t. This is very strange given that brand reputations of companies like Findus, Tesco and Nestle are at stake here. Much of the problem is down to how companies operate in the complex supply chain that we don’t hear or think about. This outsourcing seems to be subject to poor regulation by some of the business buyers and also by government based organizations like the FSA that are responsible for standards.

As pointed out in the Business Economics textbook by N. Gregory Mankiw, Mark P. Taylor and Andrew Ashwin, the supply chain for many firms can be long and complex. It includes various processes, activities, organizations and resources used both in dealing with business-to-business transactions as well as business to consumer transactions. It doesn't’t make sense for a supermarket like Tesco to make everything it sells in its stores. It is much more efficient for supermarkets to use firms who can specialize. On that basis business-to-business deals are made. Supermarkets will choose suppliers that have and lower costs and one would assume operate at the standards required. However, many of these suppliers are also outsourcing to gain a competitive advantage.

The system is open to fraud and shortcuts. To me, the key to any outsourcing seems to be not trust, but having proper regulation to ensure that as a business purchaser you are getting what you want. If you don’t do this then you stand the risk of being found out. Once found out then you stand to have your brand reputation damaged.

The demand for processed meat has dropped since the scandal broke, and more consumers are turning to local butchers to buy more locally sourced meat. One UK supermarket, Morrisons, has gained. Morrisons has a business model which sources meat through a variety of local farm communities, which means bosses have closer knowledge of the supply chain.

There is another knock on effect. Consumers are turning to prime cuts of beef rather than mince and prepared meals. The price of steaks has risen in consequence.

The long-term effects for those food firms with complex supply chains and poor regulation is unknown. They are likely to react by putting their house in order and the consumer can become forgetful after a while. In the aftermath of the scandal, politicians may demand better labelling, but the trouble with this is that the labels already contain masses of information that the average consumer just won’t read or be able to understand. Also the labelling wasn't’t the problem anyway. It’s a case of complex supply chains and lack of enforcement of regulations by the government, suppliers and supermarkets. We want to be able to trust the products we buy which may explain why the Ronseal strap line introduced in 1994 is still going strong.

Equally, a problem is that people are pushed for cash and the price of food, particularly meat, is rising above people’s wages, perhaps having impact on quality. Maybe what’s really required is a cultural shift in our relationship with food – buy less meat, but buy good meat. This kind of behaviour change is very difficult to influence, and is to an extent beyond the reach of legislation.

A final thought. A ban on horse-drawn carts from main roads in cities and towns in Romania may have contributed to the extra slaughter of horsemeat.