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Thin margins force Europe’s food industry into short cuts

By Louise Lucas and Neil Buckley | Financial Times,

LONDON — Outside the village of Rasnov in Transylvania, two cousins unload manure from a rickety wooden cart. Stela, the scrubby 6-year-old mare pulling it across the field stretching away towards the snow-capped Bucegi Mountains, tosses her head wearily.

Properly cared for, says Florin, 32, the mare may be good for another decade of farm work. After that, “she goes to the abattoir,” says Niculai, 17.

“And then she’s salami.”

As events of recent weeks have shown, Stela and her kin may also become frozen lasagna, ultra-cheap beefburgers or the sort of meatballs that harassed, cost-conscious parents feed their kids.

The appearance of horsemeat in food purporting to be beef across Europe has sparked an outcry and triggered a blame game among politicians, the food industry and supermarkets. Tons of ready meals and burgers have been pulled off store shelves and junked; shoppers are switching over to less-processed foodstuffs and vegetarian options.

Like Stela, much of our food starts life in a field. Yet this first link in the complex food chain is itself horribly fragmented: The world has more farmers than anything else. Thus, while multinational manufacturers and retailers like to make much of their willingness to don Wellingtons and get down on the farm — fast-food chain McDonald’s even devoted a global ad campaign to the subject — visits and checks are extremely sporadic.

And regardless of whether an animal’s early life is bucolic bliss or concrete dystopia, it will nearly always end in a slaughterhouse.

Abattoirs have changed in recent years — like other parts of the food chain, there are fewer of them and they are more efficient — but some things are constant. Margins are thin as a membrane and they require big, expensive equipment. “The kit you need to chop up chunks of meat is massive and soaks up a lot of energy,” said one former executive from the trade. “It’s not what you want in the kitchen.”

And yet that is precisely where abattoirs have been migrating over the past decade or so, he adds. The tight profit margins leave scant room for added costs such as transport and loading, so processing units are increasingly attached or nearby, even if separately owned. “Traveling a hundred miles there and back, and double-handling of carcasses — these are things abattoirs cannot afford.”

If animals go in through these less-than-pearly gates, they exit as what Professor Karel Williams, an expert on food supply chains at Manchester Business School, calls “deconstructed Euro-animals.”

Different parts are whizzed around the globe. The so-called “fifth quarter,” comprising offal, feet and other parts considered unappetizing in much of Europe, is increasingly going to China.

But the bulk goes to retailers and processors across Europe, either as cuts or as containers of minced meat. Explaining the difficulty of testing at this stage, one former worker depicts the scene. “You’ve got a block of frozen mush that’s maybe two-feet-by-two-feet-by-three-feet, and you’re standing in minus 10 degrees temperature. People who know say you can tell the difference [between horsemeat and beef] by looking. But in these conditions?”

As befits plastic-lined boxes filled with meat, they are a commodity product, and buyers want the best deal they can get. As decades of food deflation reversed course in the late 2000s — just as many of the world’s economies tipped into economic slowdown — shops have been engaged in a battle to keep consumers by wooing them with super-cheap food.

Williams talks of trucks lined up outside abattoirs in Holland at the end of the week, with no idea where they are going until the last minute. “You buy over the phone. A chiller truck arrives. Next week you buy a different lot from someone else,” he said. “What you have is endless European trade whereby bits of animals go into 40-ton trucks.

“Buyers are scouring Europe for the best end-of-the-line deals that happen when abattoirs have too much meat,” the former industry executive added. Each, he says, will have 10 to 20 abattoirs they deal with; if an abattoir has carcasses it needs to shift, the manager would hit the phones. “At the value end, that’s what they would be doing.”

Regulatory checks and balances may exist to outlaw adulteration, but they cannot prevent it. Indeed, bulking out staples with cheaper ingredients has flourished as incomes dwindle. In Britain, a common ruse is bulking out basmati rice with cheaper grains; across Europe, topping up olive oil with cheaper vegetable variants is another favored scam. More creatively, a Mediterranean supplier was caught milling up Moorish roof slates with similarly colored paprika.

Testing should detect adulteration, but while big brands and retailers insist they are vigorous at every link in the chain, John Smart, who heads up the British fraud investigations department for Ernst & Young, sees many taking a more cursory view.

“They rely on primary suppliers to be doing the same sort of due diligence they did [on their suppliers in turn] . . . and could be six or seven links down the chain before you get to the ultimate source,” he said. Indeed, “Some contracts stop you going down further than one layer.”

Back at the processors, the job lots of meat are banked up. Basic data, such as fat content, are punched into the computer, which calculates the requisite weights and recipe before setting the mixer in motion — and meat boxes are morphed into burgers.

A similar process takes place for lasagna, where the meat arrives in frozen pellets described by one worker as being like “a sackful of hundreds and thousands; you put a knife through the bottom” and they cascade into the mixing pot.

What might strike gourmands as disdain for food right through the process reflects many factors. The food industry is in the cross hairs on several fronts. It will be required to feed an extra 2 billion mouths by 2050, with roughly the same amount of land. People are not just eating more, but more meat and other resource-heavy foods.

Meanwhile, the industry is trying to answer policymakers’ calls for healthier food — while batting off any efforts at legislation to ensure that they do so. And above all, consumers want food that is affordable, regardless of higher commodity prices, droughts and regulatory requirements.

That is as true for dinner tables in London or New York as back in Romania, where Sorin Minea, head of the local food industry association and himself in the meat processing trade, attributes the horsemeat scandal to pressure on costs from big supermarkets, and ultimately, consumer demand for ultra-cheap food.

It doesn’t take much imagination to see why a supplier might substitute horsemeat for beef. Romanian slaughterhouses sell horsemeat for about 30 cents a pound; beef goes for about $1.80 a pound.

While beef and pork prices have gone up in recent years, “supermarkets ask to keep the price as cheap as possible,” Minea said, echoing processors and producers across the globe. “For suppliers to sell at the same price, they must change the recipe — or change the raw material and mix in something else.”

— Financial Times

Buckley reported from Rasnov, Transylvania.

© The Washington Post Company