British shoppers may pay a high price from Europe's horsemeat scandal

More testing of meat products on the heels of the expanding European horsemeat scandal won’t be cheap. Such tests will likely increase food costs, especially products with small profit margins, and worsen food-price inflation.

LONDON – For Britons worried that last week's beef lasagna was in fact a helping of horse, peace of mind that such a meal will never reach dining tables again may come at a price.

Livestock specialists say that contrary to some public comments by supermarkets, ensuring a chain of quality from farm to table will cost money – particularly at the cheaper, ready-made meal end.

"How can you supply a meal for two people for a pound (about $1.55)?" said Andrew Hyde, managing director of British meat supplier Traymoor. "I know what things cost and I know that if I was to put six ounces of quality mincemeat into a lasagna or a cottage pie then I would have to charge twice that price."

The horsemeat scandal, which has triggered product recalls across Europe and damaged confidence in the food industry, erupted last month when tests in Ireland revealed some beef products sold there and in Britain contained equine DNA.

The British government has come under pressure to act and to explain lapses in quality control. Supermarkets, catering and restaurant firms, as well as food manufacturers, are battling to restore consumer confidence amid a welter of lurid headlines playing on a popular British queasiness about eating horsemeat.

Although Tesco, Britain's biggest retailer, has said raising standards "doesn't mean more expensive food," many in the meat industry are not convinced.

"Producing high quality, fully traceable, high welfare standard livestock costs money to put on peoples' tables," said Peter Garbutt, chief livestock adviser for Britain's farmers union, the NFU.

He said consumers had to be more realistic.

Lawmakers are expected to respond to the scandal with further regulation to ensure an ongoing regime of product testing, quality assurance and policing of standards.

With DNA testing costing up to $770 per sample, creating a robust regime will not come cheap.

PRICE RISES

Analysts reckon value lines, such as frozen beef burgers or spaghetti Bolognese meals, are currently so cheap and profit margins so thin that supermarkets have little room for maneuver.

They say that spells increased margin pressure for already squeezed suppliers and price rises for consumers.

"I don't think there's any way that we can escape the viewpoint that the price of having guaranteed food in terms of it contains what it says it contains is ultimately higher prices," said Neil Saunders of retail research agency Conlumino.

"We might be speaking about a couple of pence (3 cents)  on an item, because this is a game about volume."

That would add to food price inflation, already running at 4.9 percent in the 12 weeks to Jan. 20 as a result of high commodity prices, according to market researcher Kantar, causing a further squeeze on the budgets of shoppers reeling from meager wage rises and government austerity measures.

That is a scenario lawmakers fear.

"The consumer cannot be left to face a Catch-22 where they can either pay for food that complies with the highest standards of traceability, labeling and testing, or accept that they cannot trust the provenance and composition of the foods they eat," said Anne McIntosh, a legislator who chairs the cross-party Food and Rural Affairs Committee, which published a report into the scandal last week.

Food experts say globalization has helped the food industry grow, but has also created a vast system which has fuelled the risk of adulteration.

Mark Price, managing director of upmarket British grocer Waitrose, told Reuters the horsemeat scandal was the inevitable result of big grocers putting pressure on suppliers.

"If you have a competition that says: Who can sell the cheapest stuff? Inevitably at a point in time you will get something like this," he said.

Two Competition Commission investigations have cleared supermarkets of unduly pressuring suppliers.

Tesco CEO Philip Clarke said on Friday he had ordered a review of the firm's approach to its supply chain. He wants relationships with its suppliers to become more "transparent and collaborative."

Cooperative Group CEO Peter Marks similarly spoke of taking a closer look at its supply chain.

Meanwhile, although the horsemeat scandal has undermined grocers' relationship with customers, investors appear unperturbed.

Last week, the height of the crisis, shares in Britain's food retail sector rose 1.2 percent. So far this year the sector is up 6.2 percent.

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