Some traditional butchers are concerned supermarket buyers attending auctions are pushing up prices

The horsemeat scandal slashed sales of frozen burgers, produced a bonanza for European testing labs and unleashed a Twitter storm of jokes. But it failed to put so much as a dent in the share prices of most of the retailers and manufacturers affected by it.

Just why the biggest scandal to hit Britain’s £160bn food and drink industry since the BSE, or mad cow disease, crisis of the 1980s has been shrugged off by investors is in large part down to sanguine consumers. But it also reflects uncertainty as investors, retailers and manufacturers scramble to pinpoint what, if any, will be the enduring legacy of the debacle.

Retailers’ shares were trading above the level of January 16, when the presence of horsemeat was discovered in burgers and ready meals on UK supermarket shelves. There has been just one casualty: Greencore, whose Asda’s Chosen By You 350g Beef Bolognese Sauce initially tested positive for equine DNA in mid-February.

Investors rushed to sell when the test results came out, sending Greencore’s shares down by about a quarter on the day; they remain about 8 per cent below the 115p level of early February and not even news that further tests showed the first set were inaccurate – and that horsemeat was not present – reversed the fall.

Damian McNeela, analyst at Panmure Gordon, described the impact on Greencore as an overreaction, noting that the meal concerned had sales of £300,000 out of total group revenues of £1.2bn.

There is little more logic to the punishment meted out to Greencore than to the meteoric rise of Crawshaw.

The butcher’s shares gained a penny, from 3.6p on January 16, on the assumption that its vertically integrated model would win it custom. But even that euphoria is running out of steam – shares are now only slightly higher than the pre-horsemeat levels.

But some also question the immunity of the supermarkets, which were in the line of fire when the scandal first broke. Footage of products being swept off shelves played across television screens and many viewers were quick to stop buying burgers and beef ready meals.

Tesco, Britain’s biggest retailer, was one of the first casualties in the aisles after a burger in its value range was found to contain 29 per cent horsemeat. The scandal, alongside the absence of the aggressive vouchering that Tesco carried out a year ago, have stalled Tesco’s sales growth over recent months, according to industry data from Kantar Worldpanel.

Yet its shares over the period have outperformed those of Wm Morrison, its smaller rival and ostensible winner from the crisis given its more vertically integrated model that leaves less room for unscrupulous tampering. Morrison’s sales rose 0.8 per cent in the four weeks to March 17, a reversal on the previous few months, when its sales fell.

Since January 16, Tesco shares have risen 10 per cent to Morrison’s 9 per cent. But J Sainsbury, whose latest results suggested it had been a beneficiary of horsemeat, has overtaken both, with shares rising 16 per cent over the period.

According to Kantar figures, Sainsbury was the fastest growing of the so-called big four UK supermarkets, with sales rising 8.3 per cent in the four weeks to March 17.

Investors’ sanguine attitude apes that of consumers, who are “pretty thick skinned now in terms of production line food scares”, according to Clive Black, analyst at Shore Capital.

But what investors have not yet got to grips with is the lasting legacy: in terms of structural change and costs.

No one is in any doubt that the spotlight on supply chains will trigger a bloated expense item on the profit and loss account. Overhauling supply chains and bigger ongoing testing will weigh on retailers and manufacturers – the question is whether that will dent margins or be passed on to consumers.

Manufacturers reckon precedent suggests supermarkets will pass the price back to them – although for now Tesco has said it will bear the initial cost of £1m-£2m for the new DNA testing regime. Cranswick, which makes meat and pastry products, is also banking on higher costs as part of an expanded testing programme.

Potentially bigger is the cost impact from the rush to source livestock locally – a charge led by Philip Clarke, chief executive of Tesco, but with the other grocers hot on his heels.

Butchers, used to low-key auctions, grumble that corporate buyers from the big supermarkets are now rolling up, complete with big cheque books, spoiling the party and pushing up prices.

But this could look like small change if the supermarkets push out their pledges to pork, about half of which Britain imports. “If the market leader decides to go to 100 per cent, that requires quite meaningful change in pig production in the UK,” Mr Black says.

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