How Aldi’s apple agreement could change the game for growers

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apple farm farmer grower fruit supply

Imagine having the same job for 20 years, the same car or phone… or even the same buyer. It’s hard to imagine because we live in a disposable world. Almost everything is short term, especially relationships between retailers and suppliers. Buyers are rarely in role longer than 18 months. Agreements are generally for no longer than a year.

However, a game-changer was recently announced by Aldi. It has entered a 20-year agreement on apples with AC Goatham, which will create a 200-acre ‘Aldi Orchard’ growing gala and braeburn varieties.

Why is it game-changing? Because a long-term agreement previously would be no longer than six years. And even those were extremely rare. Twenty years is four cycles of government, at least five or six CEOs in most retailers, and at least 15 different buyers.

An agreement of that length brings security – not just for the farms supplying the apples, but for Aldi, which has secured availability. The number one job of a buyer is to make sure stores have stock on shelves. After you have secured availability, you agree the price. For years, buyers have focused solely on price and availability has suffered. Risk in the sector has increased exponentially and that risk has been pushed down the supply chain.

The horticulture sector has for a long time suffered from agreements that are not only short term, but often agreed late. Some agreements are still being signed when the product is being picked. Retailers know the grower needs to sell, so they wait as long as they can to see how low the price will go.

How have farmers and growers responded? They have left the sector or grown less. When they have an agreement, they don’t grow 5% more to ensure there is enough. They can’t afford the risk. When I was researching the Oxford Farming Conference report into food security last year, I kept hearing how the risk versus reward ratio was out of kilter. More farmers are asking: is it worth doing?

The long-term answer is ‘yes’, the future for UK farming is bright. We will have better access to something other countries lack: water. What we haven’t had is enough long-term agreements from retailers that allow growers and farmers to invest.

Retailers consistently talk about how long they have been working with their farmers, and some relationships go back over 40 years. But how many of these relationships are based on anything other than 12-month agreements? Imagine that 40-year period was divided into two agreements instead of 40. What could be achieved?

Aldi isn’t the first to go longer than 12 months. Lidl has announced long-term agreements in eggs, pork and root vegetables. But none are anything like 20 years. Imagine what investments could be made, and what strategic decisions will be possible, in that timeframe. The grower can look at ways of improving yield, quality and productivity through a different lens – one that is not based on distress.

We are in the middle of a price war and retailers want lower prices. But they have ended up adding cost into the supply chain with annual tenders. I hope this is the beginning of the end of that practice, and the start of a more grown-up way of working.