Will middlemen destroy the food industry?

Our last blog comparing mega dairies and the existing supply chain, to small artisan dairies selling direct to local customers, has led to an interesting question. What effect do middlemen have and will they destroy the food industry.

Our last blog asked whether we were better off having a large number of small dairies supplying high quality milk and dairy products direct to local consumers, or a small number of mega dairies supplying the supply chain with a watered down, pasteurised, homogenised, bland, commodity?

A few people were upset by the blog and did not believe that the consumer receiving the better product from the local dairy was only paying a small amount more.

It does seem crazy that small local dairies can supply a great product at a competitive price, compared to a mega dairy producing milk for half the price. Until you look at the supply chain and the roll of the middlemen.

The MILK supply chain has converted milk to a commodity by blending, pasteurisation and homogenisation. This means that it has more shelf life and can be moved around the country to supply shops and consumers. It also means it can be traded by middlemen.

These people never have to produce the product or even take delivery. Hypothetically, they can offer big corporate dairies like Wiseman or Dairycrest a huge contract, from someone like Starbucks. To win the order the dairy may even sell at a small loss to insure it moves all the milk it has in stock, or committed to buy from producers.

This process means that the corporate dairies must charge someone else a higher price to remain in business. The net result is that the producer gets very little, the consumer pays too much and the middleman buys another Range Rover.

Yes, these are the basic economics of supply and demand, but do not seem to work in the long term interest of producer or consumer!

Unfortunately this happens throughout the food industry including the meat and veg trade and is why by removing the middlemen and selling direct producers can compete with the national supply chain.

If you want to help this process, buy local food and drink using the BigBarn map. And tell your friends. As always, we welcome your comments below.