Regional sourcing and the local economy

The underlying basis for this module is that supermarkets should contribute to rather than detract from the local farming and food economy and the local community through greater emphasis on local and regional rather than national sourcing of goods and services where appropriate and feasible, and redefining the role of the store as one which assists wealth to circulate and multiply within communities and regions. This module does not address the environmental impacts of transport related to supermarket distribution systems (see transportation element of the Environment module). The Policy Commission for the Future of Farming and Food ("The Curry Commission") concluded that local food will be the next major development in food retailing, and that the supermarket sector should re-examine its supply chains accordingly.

The restructuring of supermarkets in the 1980s saw more than just the growth of out-of-town superstores,[i] it saw the growth of the multiples' power in the food chain. The five largest supermarkets now sell 70% of food in the UK.[ii] Retailers' sourcing strategies can therefore have significant impacts on the local economy and the viability of suppliers, particularly small-scale producers and growers. Coupled with increasingly streamlined accounting systems as well as centralised purchasing and distribution (suppliers deliver to regional warehouses), their huge market share has given the large supermarkets the ability to side-step wholesale markets and purchase direct from the supplier.[iii] They have worked to reduce the number of suppliers they deal with and are now able to plan and control supplies and specify to growers exact specifications, delivery times and quantities.

The rise of the multiple has brought considerable benefits to many consumers, particularly the convenience of choice from a large product range under one roof. However, in identifying and satisfying consumer preferences so effectively, and therefore increasing their market share, supermarkets have also brought some negative impacts including concentration in the food sector, particularly in fresh produce; a major decline in specialist, independent stores (butchers, bakers, greengrocers, etc); and a decline in the availability of local/regional produce. This module explores how deliberate, positive action by supermarkets, which takes into account local needs and conditions, and places more custom with local businesses - especially food suppliers - could have a strong and positive effect on local economies.

The recent Mintel report investigated the popularity of local produce among UK consumers, examining attitudes and practices towards British food in general, and towards buying local/regional produce. This the first time Mintel has dedicated a report specifically to this subject, a reflection of the growing level of interest in local sourcing.[1]

The Mintel survey revealed that British shoppers have a strong preference for locally grown and/or British produce. Half of those surveyed claimed that they try to buy British when shopping for fresh meat; 44% look for British fresh fruit and vegetables; and 31% prefer British fresh fish. In addition, 23% said that they are buying locally grown produce through farmers markets. A similar proportion said that they like to support the local economy by buying local produce and that they believe such produce is inherently fresher.

The Mintel survey revealed considerable frustration among consumers who said they are unable to buy British when they want to because the produce is not stocked by their retailer. Almost a third (30%) complained that British produce is not always available; one fifth (21%) blamed supermarkets for not stocking enough British-grown fresh fruit and vegetables, and 11% claimed that these same retailers do not carry enough fresh British meat.


Losing the local and regional food supply

With their large purchasing and marketing power, supermarkets have out-competed smaller independent stores. From 1980 to 1994 the percentage of food sold by independent retailers fell from 31 per cent to 22 per cent. Over the same period, the number of independent retailers declined by 25 per cent, with numbers employed declining by 35 per cent. Villages and market towns lost half of their small shops between 1991 and 1997.[iv]

Supermarkets' quest for easily transportable, cosmetically attractive, and broadly acceptable produce has favoured the cultivation of uniform varieties, and the production of uniform foodstuffs over the more locally distinct, quirky and genetically diverse varieties that prevailed as part of former farming practices and food traditions.

It is commonly argued that the benefits gained from the prevalence of smaller independent food stores can include:

This module seeks to explore how multiple retailers could achieve these benefits through changing the way they manage their sourcing. The local sourcing debate often centres on the merits of direct sourcing. However, significant downsides to sourcing direct from suppliers include:

Supermarkets argue that to operate due diligence, and achieve the required volumes and quality control, they must have a centralised system of delivery. In general, store managers of the multiples are not responsible for orders and therefore have no control over local supply, although in some cases store managers are able to suggest local suppliers who they would like to use, who are then subject to central management and procedures. In Local Sourcing, the recent briefing by the Institute of Grocery Distribution (IGD), some pointers are given which include the potential for assisting suppliers, for instance, in providing advice, produce pick-ups, or connecting them with other suppliers to help share costs.[v]

Supermarkets and the local economy

As supermarkets have gained market share from independent and specialist stores, the wider local economy has been affected. Whereas a local store would probably use a local printing shop or firm of solicitors, a major multiple is likely to use national services contracted centrally. Food retailing employs 4% of the national workforce. According to the BRC, in 2001, 72,700 net new jobs were created by the retail industry, 68% of the net new jobs across the economy as a whole.[vi] Yet one estimate suggests that less than 16% of supermarket turnover translates into local wages, purchases and services.[vii] The same study found that every £10 spent with a local food initiative is worth £25 to the local economy, compared with just £14 when the same amount is spent in a multiple supermarket. The same amount is worth more with local schemes as it stays in the vicinity, where its value increases as it is reinvested many times over.[viii] This is often referred to as the multiplier effect.

The focus of this module is primarily on supermarket sourcing of local and regional food. Supermarkets’ annual spend is primarily on purchases and on labour. Annual reports show that they spend a far higher proportion on their purchases than on labour, and the bulk of those purchases are food products. It therefore makes sense to focus on the food portion of supermarket spending as a way to assess the impact they have on the local economy.

Other forms of local food supplies, often referred to as 'local food links' have been gaining an albeit small market share. These include vegetable and fruit delivery schemes, direct mail and delivery schemes, community supported agriculture, farmers markets, and community food initiatives such as consumer buying cooperatives (see case study below). Studies in the UK and the US suggest that increasing such initiatives would have a positive local economic and environmental impact. It is therefore important to compare the relative merits of this approach with an increase in local and regional sourcing by the supermarkets.[ix]


Case study: Local food links[x]

Farmers Markets – A comparison could be made with farmers' markets, which offer food that is locally produced – they are described as 'the British farming industry's most high-profile shop-window'. A Farmers' Market is one in which farmers; growers or producers from a defined local area are present in person to sell their own produce, direct to the public. All products sold should have been grown, reared, caught, brewed, pickled, baked, smoked or processed by the stallholder. National Association of Farmers' Markets Criteria interpret the radius from the market as generally being used to define "local": 30 miles from the market would be a typical definition. The actual distance depends on circumstances and on the consumers' own perception of "local". Information on the market's policy and stallholders should also be readily available.[xi] Customer surveys show that the public are keen to support their local producers and 400 farmers markets are now supplying regional and local food to customers on a regular basis. Some supermarkets, notably Asda, are now running farmers markets on their car parks on a regular basis. These would score highly in terms of use of local suppliers, promotion of local and seasonal, and returns to local economy.

Independent stores – Studies have shown that small independent local stores are likely to use more local suppliers and have a significant multiplier effect on the local economy.[xii] It has been estimated that the rate of closure of small shops is costing local economies about £550 million per year as a result of the lost 'multiplier effect.[xiii]

Farmers diversifying - In Wye, Kent, a project, co-ordinated by WyeCycle, ensures that food produced locally is marketed at farmers' markets and through box schemes and local wholesalers, which minimises food transportation and packaging. Farmers have responded to strong demand by diversifying to ensure that demand is met with adequate supplies.[xiv] The aim of diversification is two-fold – an increase in the number of different foods and varieties of each, and the provision of food throughout the year. One farm in the region can now supply a range of fruit and vegetables all year round. It offers over a hundred different varieties of apples as well as a selection of plums, pears, cob nuts and other fruits and vegetables.[xv] An additional idea being developed is for 'Superfarmers' – high street stores supplied direct by local producers with addition space for dry and household goods - to compete with supermarkets directly.

Direct marketing - this is another comparable retail operation. Approximately 40,000 households in the UK receive a box of organic produce, delivered to their door or nearby each week. The largest box scheme, Riverford, based in Devon, delivers 3500 boxes of organic vegetables per week. West Devon Environmental Network found that there was a massive demand for local organic produce, which far exceeds the available supply. They have estimated that if local producers met this demand it could add £4.9 million to the local economy every year, and create at least 61 new jobs.[xvi]

The independent local food sector in Devon, Somerset and Dorset includes 900 businesses involved in food production, processing, wholesaling, retailing and catering. The farms employ an average of 3.4 full time jobs, compared to an average of 2.34 full time jobs for the South West as a whole, meaning that in all there are 954 more jobs in agriculture. On average these businesses spend £30,000 per year in the local economy, a total of £27 million per annum.[xvii] A Campaign for the Protection of Rural England (CPRE) report presented quantitative evidence of the detrimental impact of an out-of-town store on farmers, local stores and employment in Suffolk. It showed that complex local networks of supply and demand would be destroyed by a new superstore, and with it, jobs, shops and wholesalers.

In relation to local jobs, a 1998 National Retail Planning Forum report showed that, on average, when a superstore opens, 276 full time equivalent jobs disappear, as a result of closure of food retailers, and subsequent effects on suppliers and nearby non-food retailers. Government research in 1998 showed that out-of-town or edge-of-centre supermarkets have resulted in disinvestments in market towns and district centres. This has lead to a decline in market share of principal food retailers by 13-50%.[xviii] In their defence, the supermarkets argue that their superstores are beneficial to local communities, creating jobs and 'clawing back trade'. Over 470,000 people are currently employed by the Big Four, and in 2000 they pledged to create 28,000 jobs.[xix]

Multiples changing to local?

As a result of recent food scares, increased demand for local food and concern about food miles, there has been considerable pressure in the last two years for multiple supermarkets to source their products and services more locally. There are five perceived benefits associated with this:

  1. to renew the relationship between producer and consumer;
  2. to strengthen local economies and reduce 'leakage' of both finance and other resources (including labour and nutrients) from the local economy;
  3. to create opportunities for more secure and sustainable food supplies;
  4. to improve relationships with local authorities and citizens e.g. to facilitate planning decisions, and
  5. to reduce the environmental impact of complex, lengthy distribution patterns of food.[xx] (See Module 1: Environment for more on this issue).

The last two years have seen a plethora of policy announcements and initiatives by the main supermarket chains on local sourcing. Whilst such initiatives are relatively young, there is some evidence that there could be some discrepancy between rhetoric and reality of store sourcing.[xxi]

The move to encourage supermarkets to buy and sell local does have implications for local independent food initiatives, some of which are negative. They could both reduce the availability of local produce and lessen the main marketing advantage of local food initiatives. However, in recognition of the fact that supermarkets are now the primary food supply for the majority of households, it is suggested that positive results could be gained from a supermarket policy of sourcing and promoting more local produce. Use of local services could also have a big impact by recycling money within the local economy, i.e. 'plugging the leaks'.

We would hope to see decentralisation of purchasing decision-making, combined with the development at Head Office of a local and regional sourcing policy. Supermarkets should invest some time into developing a framework to implement local sourcing, which may mean considering where they could give more autonomy to local or regional managers to buy direct when in season and when practical. They could also develop training schemes for suppliers and supplier groups on delivering quality and quantities of products direct to store. Larger food retailers are making links with new farmers and those wishing to acquire business skills through the IGD's Small Business Mentoring scheme. The Masterclass course sponsored by Tesco at the Harper Adams University College is an example of one company's initiative to help inform new and upskilling farmers.[xxii] In the long term, it should be possible to organize operations differently so that regional distribution centers act as depots for regional, rather than nationally distributed produce, so that more produce can reach the stores without leaving the region.

In summary, the arrival of a new supermarket tends to reduce employment and financial flows within the local economy. Deliberate action by supermarkets, which takes into account local needs and conditions, and places more custom with local businesses - both suppliers and service providers - could have a strong and positive effect on local economies. A change for the better will require greater emphasis on regional rather than national distribution patterns, and on redefining the role of the store as one which assists wealth to circulate and multiply within communities and regions.



The issue of local sourcing is relatively new. We are currently looking for evidence of commitment to the issue through company policy and the extent to which these policies have been successful. Three indicators are used in this module, to assess the level of support provided by supermarkets for the local economy.

The three indicators currently used are:

  1. Company policy on sourcing food 'locally' and 'locality' foods, and on promotion
  2. Extent of local and regional sourcing and promotion
  3. Extent of local and regional sourcing and promotion - store shelf survey

In future years, depending upon the ease of data collection and the standardisation of reporting procedures, other indicators may be added.

Verification will also be done through looking at company policy documents and any available independent data on local/locality sourcing by supermarkets and local/locality suppliers to supermarkets.


[1] Attitudes Towards buying Local Produce, January 2003, Mintel International Group Ltd

[i] over 25,000sq ft

[ii] Food Miles: still on the road to ruin? Sustain 1999 IGD Issues December 2000 Market Share figures, Press release 3rd Dec 200, Institute of Grocery Distributors.

[iii] Jo Foord, Sophie Bowlby and Chrstine Tillsley, 'The changing place of retailer-supplier relations in British retailing' Retailing, consumption and capital, Neil Wrigley and Michelle Lowe (editors) (Harlow: Longman, 1996); J. Frances and E. Garnsey, 'Supermarkets and suppliers in the United Kingdom: system integration, information and control. Accounting, organizations and society 21: 591-610 (1996)

[iv] University of Nottingham Business School, Neighbourhood Shopping in the Millennium, October 1998.

[v] Local Sourcing, IGD/Rural Action/Business in the Community, 2001


[vii] NEF Cusgarn Organics Local Money Flows, Tim Boyde, 2001. A New Economics Foundation (NEF) study has shown that money spent on locally-produced food generates almost twice as much income for the local economy as the same amount spent in a typical supermarket. The finances of a Cornish vegetable box scheme, Cusgarne Organics, based near Truro were tracked in a survey. The study followed the trail of income to monitor exactly where its turnover was spent, how much of it was spent locally, what happened to this money at the next level of spending and so on.

[viii] Local food better for rural economy than supermarket shopping. News Release, Caroline Hill, New Economics Foundation, August 2001.

[ix] Eating Oil, Sustain 2001 and Food, fuel and freeways, Leopold Center for Sustainable Agriculture, US, 2001…

[x] Local food schemes also include Urban Agriculture. For more information see the websites of Sustain at www.sustainweb.org; The Foundation for Local Food Initiatives at www.localfood.org.uk and the Food Futures and Local Food Links programmes run by the Soil Association at www.soilassociation.org.uk.

[xi] NAFM Website

[xii] see Food Webs, CPRE 1988

[xiii] Local Food in Britain: a research review for CPRE, November 2001, CPRE

[xiv] Changing Places. BBC Radio 4, 24/9/2001.

[xv] Memorandum by WyeCycle (DSW 05). Submission to the Select Committee on Environment, Transport and Regional Affairs, September 2000

[xvi] Elm Farm Research Centre Bulletin March 2001

[xvii] Local Food Links in the South West of England. Charles Couzens, Emma Delow and Sarah Watson, f3 - The Foundation for Local Food Initiatives, November 2000.

[xviii] DETR. 1998 The impact of large foodstores on market towns and district centres. DETR, 1998, London

[xix] 'Supermarkets expand' The Times Business News 11th January 2000

[xx] See Eating Oil: food supply in a changing climate, Sustain December 2002

[xxi] Local Food Sourcing - PR or reality? Internal report by Sustain, 2000

[xxii] BRC Submission to the Policy Commission on the future of farming and food, 2001


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